As a business practice, HRM is largely determined by the productive models it is supposed to serve. Its evolution during the 1970s and 1980s bears witness to this. But HRM, as an academic discipline, also evolves according to managerial ideas and theories that convey a “good” way of managing work processes (Guérin & Wils, 2002).
The way in which companies organize the management process of their workforce is largely a result of the production model in place. Indeed, at the company level, the social system is designed to meet the needs of the productive system. This justifies the definition of Edwin Flippo “HRM is the process of planning, organizing, directing, controlling of procurement, development, compensation, integration, maintenance, and separation of human resources to the end that individual, organizational and social objectives are accomplished.” (Flippo, 1984).
Human resources management characterizes both a field of practice, that of workforce management, and a discipline just like strategy, finance, marketing, etc. This discipline itself is more recent than its practices (Guérin & Wils, 2002).
In this report, I will try to critically review and analyze typical organizational HRM practices at SAIDAL Group SARL, the biggest Algerian pharmaceutical company, two (02) leadership styles from the company’s internal environment, their applications, and finally discuss the benefits of an HR policy of Etisalat, a telecommunication company based in UAE and its influence on the global organizational behavior.
Keywords: Human Resource Management, SAIDAL Group SARL, leadership styles, HRM organizational practices, global staffing policies.
Table of Content
What is SAIDAL Group?
SAIDAL Group is a pharmaceutical company based in Algeria, currently with a Capital of 2.5 Billion Dinars. 80 % of SAIDAL Group’s capital is owned by the state and the remaining 20 percent were sold to institutional investors and individuals in 1999 (mdipi.gov.dz, 2010). The restructuring process in 1997 contributed to its transformation into a big manufacturing company with three divisions (Pharmal™, Biotic™, Antibiotical™).
Figure 1- SAIDAL Group Logo
SAIDAL’s main mission is to ensure the company’s strategic stability and profitability, and this by:
- Safeguarding its financial flexibility and independence
- Maintaining a constant development of its products’ quality,
- Reaching its growth targets
- Improving its human capital.
- Achieve the State’s defined goals as the primary owner/shareholder.
To face new challenges, SAIDAL Group SARL should focus on management mechanisms in a global and strategic context, which integrates the HR dimension in all its managerial models. This might concern a change in the current managerial models in a way that makes HRs, through their skills and knowledge considered as the key resource at the heart of the company’s performance, creating value and competitive advantage.
SAIDAL Group Current Organizational Structure & HRM
Figure 2.. SAIDAL SARL: organizational structure. SAIDAL SARL is characterized by a simple and flexible organizational structure with a strong interweaving of functions.
The HR department has four (04) essential services (SAIDAL Group, 2020):
- Social service: its mission is to manage all the social aspects of the employees.
Training and personnel development service: training and recruiting.
Occupational medicine service: it provides medical care for the employees.
Figure 3. Major HRM Components
In any company, the HR department deals with the most valuable resource: the employee, and therefore, it is considered as the backbone of any type of organization. Acting as a liaison between managers and regular staff members is a central role of HR, thereby helping businesses achieve their goals by ensuring that businesses hire and maintain empowered and competent employees. Other than that following are the main tasks of the human resource division namely, HR planning, staffing, developments, motivation, change management, appraisal, and evaluation, etc.
HRM manages many functional aspects within a given organization. From a dynamic and more explicit perspective it can be said that human resources management includes, all the activities of acquisition (selection, recruitment), qualitative adaptation (training, skills management), remuneration (compensation, benefits, promotion, career management), employees’ comfort and wellbeing (working conditions, safety, work content, work organization), stimulation and mentoring (participation, dynamism, animations, recognition, encouraging involvement), and adjustment (staff reduction, externalization/internalization, contractual adjustments, …) of personnel, decided by HR managers, with the aim of achieving short-, medium- and/or long-term techno-economic and socio-political objectives (Loosemore, et al., 2003).
All of those core HRM activities are being handled by the above four divisions. This kind of category or divisional system is a little bit different from other organizations. But SAIDAL has focused more on the social and medical factors of their employees more by setting separate sections/services for them.
At SAIDAL, the HRM department performs a wide body of tasks, whether it is a matter of managing contracts and payslips or communicating internally with employees, managers, directors, etc.
The Human Resources Director/Manager is responsible for defining and implementing the company’s HRM policy (recruitment, compensation, mobility, career management, etc.) that controls the application of legal and regulatory obligations relating to working conditions and employment relations, and organizes social dialogue and participates in internal communication operations related to changes in the company.
The director of HR may be assisted by a Manager (HR Manager), who ensures the implementation and the execution of the company’s HR policy.
The following table presents the four essential elements that we have identified as constituting HRM at SAIDAL SARL:
|RULES AND STANDARDS
Legal rules, collective agreements
Branch, company agreements
Standards, products, regulations
Internal: management, HR services,
managers, employee representatives
External: public authorities, trade unions,
Determined by corporate strategies
– external contexts: markets,
products, business segment ;
– internal contexts: modes,
the organization, qualification levels,
work routines, the dominant culture
|Table 1. essential elements constituting HRM at SAIDAL SARL (source: Saidal Group)|
Current HR Practises at SAIDAL SARL
Management practices refer to the “visible” part of HRM at SAIDAL: recruiting, assessing, training, etc. They are now increasingly “equipped” and only make sense if they are developed in line with the management choices of the company, particularly in terms of strategy, decisions made on the basis of internal and external factors.
Management practices characterize the strategic choices that the company must make, in terms of employment, remuneration, employee loyalty, etc. We have already mentioned the plurality of internal actors involved in the field of HRM. To these should be added a certain number of external actors: institutional partners, more or less influential direct collaborators (consultants, professional associations), economic partners (subcontractors). However, this involvement might potentially increase conflicts of interest with which HRM will be confronted (Blum & James Jr, 1997).
SAIDAL has many functional departments, and the roles of each one are unique and interconnected. The aim of HRM, in general, is to optimize the use of the human factor in the company, therefore it is necessary to maximize returns in relation to obtaining a favorable social climate.
HRM manages many functional aspects of an organization. From a dynamic and more explicit perspective, we can say that: human resources management includes, in an organization, all the activities of acquisition (selection, recruitment), qualitative adaptation (training, skills management), remuneration (compensation, benefits, promotion, career management), employees’ comfort and wellbeing (working conditions, safety, work content, work organization), stimulation and mentoring (participation, dynamism, animations, recognition, encouraging involvement), and adjustment (staff reduction, externalization/internalization, contractual adjustments, …) of personnel, decided by HR managers, with the aim of achieving short-, medium- and/or long-term techno-economic and socio-political objectives (Loosemore, et al., 2003).
Training involves the general, technical and practical knowledge related to the exercise of a profession, but also to the behaviors, the attitudes and the means that allow integration into a profession and more generally into all social activities” (Brockbank, et al., 1999). We can deduct from this definition that training plays an essential role in developing economic competitiveness insofar as it promotes the workers’ employability and helps acquire the skills needed.
According to a survey conducted by the University of Bejaia (Algeria), it has been found that SAIDAL SARL relied on continuing vocational training which aims to ensure the good mastery of tasks as well as the adequacy between the abilities, qualifications of employees and the requirements of the position held. Moreover, the trainees stated that all the training they received enabled them to improve their independence at work (Amel, et al., 2015).
Training has been considered as the main HR function at SAIDAL as the pharmaceutical industry requires highly advanced processes and needs much trained and top skilled professionals to be employed. Therefore, from the beginning, SAIDAL SARL relied on continuing vocational training which aims to ensure the good mastery of tasks as well as the adequacy between the abilities, qualifications of employees and the requirements of the position held. Moreover, the trainees stated that all the training they received enabled them to improve their independence at work.
Other than that, they have set up annual training plans for each of the employees making at least two pieces of training are necessary for all per year.
Recruitment is the set of techniques and procedures carried out to attract potentially qualified and capable candidates for positions within the organization (Ordanini & Silvestri, 2008).
As the first step in recruitment, a vacancy should arise. The Human Resources department at SAIDAL must decide whether it is necessary to hire a person on a seasonal, contract, part-time or full-time basis. Once the decision has been made, the vacant position is advertised to attract individuals with the necessary characteristics. SAIDAL SARL HR managers try to attract individuals and obtain information about them in order to decide whether they are interested in accepting them or not.
Recruitment requires careful planning that consists of three phases (Jaskiewicz, et al., 2014) :
- Internal research: what are the company’s needs
- Labor market research to find the most interesting offers
- Definition of recruitment techniques and standards
The different phases of recruitment are as follows:
- Position definition,
- Profile definition,
- Identification of recruitment sources,
- Recruitment resources,
- Recruitment campaigns,
- Selection mechanism,
- The hiring decision,
This implies helping employees to make career choices, monitoring them, using skills assessments and professional interviews to develop personalized career paths.
Business Intelligence and Data Collection
HR plays a preponderant role in Business Intelligence at SAIDAL Group SARL. BI has many positive benefits, it can bring on a purely HR aspect: loyalty, reduction of turnover, company culture, development of skills, acquisition of know-how, and profitability. (Forbes, 2019).
And, to achieve this, developing the emotional and organizational involvement of its employees, knowing how to lead teams in their diversity, communicating, informing and redesigning the organization of work.
And therefore knowing the logic and modes of action of trade unions, develop social dialogue, negotiate “win-win” agreements in the field with partners – Watch: which requires building its HR information system and having a strategic vision of HR, knowing how to dialogue with the HRD so that it becomes a business partner.
Social Services department is the main place where all employee-related social activities are conducted.
Corporate Social Responsibility (CSR) is defined as the integration of social and environmental concerns into the business activities of companies and their relationships with stakeholders.
The internal social responsibility at SAIDAL is mainly exercised through human resources management practices. According to a recent survey conducted within the Group, 65% of the respondents said that the company is socially responsible and “treats its employees well” (SAIDAL Group, 2020). A socially responsible company also establishes fair treatment of individuals in the workplace. This form of responsibility is assessed in particular through criteria of employment sustainability, remuneration, working conditions, and profit-sharing.
The basic task of human resources at SAIDAL involves managing each employee’s payslip. If many items must appear on a payslip, it is because they correspond to compulsory or supplementary contribution funds. Some are paid by the employer; others are deducted from the employee’s pay.
The nature of each sum must be specified in the total remuneration. Let’s list the most well-known elements of the payslip:
- the payslip must be nominative,
- each bonus is mentioned and specified,
- social declarations give rise to social contributions (provident scheme, supplementary health insurance, unemployment, retirement, etc.) for the employee, and social charges for the employer,
- the gross and take-home pay highlighted,
- paid holidays are mentioned, the days earned, taken and remaining, in the month and the year,
- any specified benefit in kind,
- any type of specified compensation, work accident, the balance of any account, savings, etc.
Employees’ Remuneration and Careers Management
Remuneration is a sum of money that an individual receives in exchange for his or her work. Its amount is determined on an employment contract and can be fixed or variable. The net remuneration is the amount that the employee will actually receive. Managers may decide to grant additional remuneration in the form of a bonus.
Fixed remuneration, variable remuneration
When compensation is said to be fixed, the employee receives the same amount, regardless of the company’s performance or his or her own performance. When compensation is variable, the employee receives a profit-sharing plan based on the company’s results or his or her own results. Sales positions are generally paid a fixed salary, enhanced by a percentage of performance. Some positions are also remunerated solely by a percentage, but may not fall below the legal minimum.
Minimum legal pay in Algeria
The legal minimum wage in Algeria, also called the SMIC (‘salaire minimum interprofessionnel de croissance’) is defined by government decree according to various criteria. The SMIC represents the minimum hourly wage. Thus, an employee may receive a salary lower than the amount of the monthly SMIC if he or she does part-time work.
Remuneration with bonus
SAIDAL may distribute bonuses to its employees. This remuneration may be included in the employment contract, or at the discretion of management. It may take the form of a thirteenth-month bonus, or a reward bonus when the performance of the company or of a particular employee has been satisfactory. The amount of the bonuses does not have to comply with the minimum wage.
Gross remuneration, net remuneration
A distinction should be made between gross and net remuneration. Gross remuneration includes wage and salary costs, deducted at source by the enterprise and paid to the various recipient bodies. Net remuneration is the amount actually received by the employee. The employee’s income tax base is calculated on the basis of his or her net remuneration.
Career management enables the design and implementation of personalized career paths for employees. At SAIDAL, career management is anticipatory and proactive in order to best meet the current and future needs of the company, while taking into account the strengths and interests of employees. It is, therefore, a real opportunity for them, since it is carried out through training, promotion, etc.
Consequently, effective career management ensures the company’s sustainability: it is a source of performance and therefore of growth. It, therefore, represents an important issue for human resources and one of their main missions.
The role of the HRM department is:
- Track all the information and data on the career path of the employees and their performance issues,
- Analyze all resources available for all critical positions,
- Identify career wishes, their relocation capacity for possible internal mobility,
- Visualize talents under multiple aspects (performance, skills…),
- Manage all positions in the organization,
- Build a talent pool, in order to capitalize on this potential, simplify recruitment processes and, secondarily, enhance the company’s brand.
Currently, most of the employees are enrolled in SAIDAL mainly because of their remuneration system. However, the problem is that even though the employees engage in work for the sake of money, their optimum performance cannot be taken due to a highly hostile working environment.
Current Issus of SAIDAL HR Functions
Despite the company’s efforts to optimize human capital management and recreate social ties, the tension persists between employees, and HR managers, according to a study of 509 employees conducted by the El Khabar (Elkhabar.com, 2020).
76% of employees do not give a positive assessment of the HR function. To the question “What does the HR department do well? “31% of employees surveyed cited payroll and 26% cited processes. More worryingly, only 6% said that it listens and 5% said it recruits. The HR functions are therefore not yet considered strategic: the tasks that are mostly highlighted are mainly administrative management of the company. A mission on which employees are very skeptical. Only 15% have complete or very high confidence in the accuracy of their pay.
Even though there is a basic framework running at SAIDAL, these results prove the fact that HR functions have failed to gain the needed objective of handling human resources efficiently and effectively to achieve the strategic objectives determined by the organization. Following were identified as the main reason for these issues,
- Lack of a proper organization of Human Resource Management function
- Lack of HR professionals to handle related issues
- Use of outdated technologies and traditional systems
- Lack of employee motivation methodologies and programs.
Recommendations to resolve HRM functional issues
New technologies have opened up a new era for the HR department. HRM human resources management software might potentially help rapidly reestablish trust generating significant benefits:
- Reduced costs
- Access to Information
- Data Analysis and Informed Decisions
- Improved Communication
- Risk assessment
- Security and Data Recovery
Furthermore, there is an urgent need for the HR department to get into HR marketing, to streamline its internal communication and to redefine its role towards more individual support.
The use of software and marketing only does not resolve the problem. Management has to involve in this matter to reorganize the HRM department and set up a program for proper in house 360 appraisals, effective remuneration systems and keeping the employees engages and well-motivated.
Other than that, an innovative approach to select and recruit the right candidate can be proposed. This will smoothen the process as well the maximum out of the candidate can be taken out making a pool of talent that will drive the organization towards its strategic objectives.
Figure 4 – Proposed innovative recruitment procedure (Created using draw.io)
Effect of HRM Practices on SAIDAL Group performance
Recruitment and Selection
SAIDAL HRD focuses more on hiring talents whose personal values complement those of the organization. HR managers make sure they’ve put the right employee into the right place. The recruiting and selection procedures are managed by a senior manager to ensure that the hiring process is competitive and transparent.
Recruiting the right candidates holds supreme meaning for an organization’s ongoing progress. Therefore, a good recruitment and selection policy are needed for the goodwill of the company. A recruiting and selection policy’s primary aim is to ensure a consistent and equitable hiring process that will assist HR employees in choosing the best applicant based on merit and importance to the position.
Every organization has their goals set to achieve strategic objectives. Employees are the ones who drive this process in the correct direction. So a good hiring decision makes the company perform very well.
Figure 5. Challenges faced in Recruitment and Selection
Above are the challenges that are faced by SAIDAL regarding their recruitment. These data were obtained from the SAIDAL training prospectus 2019 (SAIDAL Group, 2020). Identifying these challenges at SAIDAL is also a success factor for the company. If all those are addressed and resolved then the problem of recruitment will wipe out, making the recruitment system transparent and reliable.
Training and Development:
As mentioned earlier, training is provided for employees wishing to develop certain skills and acquire other competencies in their field of activity. Vocational training has become a necessity, with many advantages.
For SAIDAL, offering its employees training sessions means increasing its competitiveness, attractiveness, and productivity, building employee loyalty and enhancing the company’s image.
In fact, training makes it possible to improve the employees’ qualifications, and therefore the company’s competitiveness. A well-trained employee will indeed be better able to take strategic decisions quickly. Continuous training also saves time, as the employee works faster.
It is also a way of retaining employees and limiting turnover within the company. Indeed, for the employee, continuous training means maintaining employability, as he or she improves or acquires new skills while remaining within the company.
Figure 6. Approaches in strategic human resources management
Algeria has 65 higher education institutes including 26 universities among them. These are good sources for exposure to the employees of SAIDAL which mostly rely on the new findings, research, and talent-related to the pharmaceutical industry. Therefore, these are the main resources for training and development for SAIDAL with plenty of employees willing to go higher in their dreams.
Leadership theories and applications in the Pharmaceutical Industry
The term Leadership describes an individual’s capacity to direct certain individuals or organizations toward such goals. One leader is one who can direct, control and inspire (Crawford, 2012).
A leader differs from a manager or decision-maker, who has managerial expertise but does not necessarily “lead” a party, an entity or a country to another stage of its growth. A strong manager may be a leader but there is no direct correlation between the two attributes. Long associated with the political arena, leadership in other fields including the pharmaceutical industry, culture, technology, and sport is a sought-after value. There is also a distinction between public and private government, as the latter is business-oriented. A politician is not always a leader; other leaders, conversely, are not politicians.
There is no magic mix of features that will make a leader effective. This doesn’t mean, though, that none of them are more likely to win, and that we cannot learn to be more successful leaders (Burns & Rechy, 2004).
Leadership theories are centered on understanding how and why some individuals are becoming leaders. Those hypotheses tend to concentrate on leaders ‘characteristics. Yet others aim to recognize habits people should follow in various contexts to develop their own leadership skills.
To identify the leadership status and qualities of a particular organization, in our case, SAIDAL group SARL, it is needed to have a wide understanding of the common leadership theories applied in the world. Therefore, most commonly used leadership theories are explained here.
Hersey and Blanchard’s Situational leadership theory
The expression ‘situational leadership’ suggests leaders should adapt their strategy depending on the individuals they lead, and the situations around the challenge at hand. Nonetheless, relying on a number of situations, the Hersey-Blanchard Situational Leadership Theory is one focused upon variable leadership. When a leader will react as easily as possible to a given situation, in the end, everyone can benefit. (Papworth, et al., 2009).
Figure 7. Hersey and Blanchard’s Situational leadership theory (source:oregonbusiness.com)
In the basic model of the situational leadership there are four types of leader depending on the directive and the supportive behavior they are showing towards their subordinates namely:
The directing leader (originally named ‘telling leader’) is the first form of leadership mentioned in Hersey and Blanchard’s Situational Leadership Theory. Successors who lack both the ability and the desire to conduct a mission require a leading master. Hersey and Blanchard are advising against supporting actions at this level since the adherent can view the supporting actions as a reward. Some supporters then require a lot of task-driven coordination and monitoring.
The coaching leader (originally named ‘sales leader’) is the second category of leader discussed in Hersey and Blanchard’s Situational Leadership Theory. The coaching leader is important in situations where followers have a strong need for guidance and encouragement. Followers who are unable to perform a task or lack the confidence to perform it but are committed to the mission and/or the company need a mentor. In this scenario, the leader may exert more direct influence over the effort made by the follower to achieve the mission, but he can still have a great deal of support along the way.
Followers need more leader’s support than their expertise. Hersey and Blanchard see these leaders focusing more on building organizational conditions that promote the desires of these followers.
Finally, if a follower is both inspired and professional, he or she wants a chief delegate. In this situation, this person can be conveniently assigned by a leader with the assumption that the follower can execute the tasks. Leaders cannot, however, fully stop positive actions and if a follower thinks he or she is totally neglected, the interaction between the leader and the follower can be negative.
The situational approach emphasizes the importance of contextual factors such as the type of work performed by the company, the type of external environment and the characteristics of the followers. There are two categories in this approach. The first studies the impact of contextual factors on leadership behavior, while a second looks at the relationship between leader behavior and performance with contextual factors as moderating variables (Brockbank, et al., 1999).
The situational theory of leadership developed by Hersey and Blanchard (1979) is logically positioned within this theoretical corpus. Their theory considers the characteristics of followers as an essential element of the situation, particularly their level of experience and competence. Thus, employees with low skills would need a different leadership style than skilled ones. Four leadership styles underlie this theory: directive, persuasive, participative and delegating. The directive style is “descriptive” since the leader describes all the tasks to be accomplished; this style is more appropriate for the junior employee. The persuasive style includes defining a direction and consulting with employees before making important decisions. The participative style characterizes the advisory leader who guides and coaches his collaborators. Finally, the delegating leader gives full responsibility for the execution of tasks to the employee at a high level of competence.
Transformational leadership seeks to raise the level of motivation and morality in organizations by relying more on long-term intrinsic needs and less on short-term extrinsic demand. A transformational leader is a person with a vision for the future who shares a passion for achieving great things. He or she drives his or her project forward by injecting enthusiasm and energy into the people around him or her. His end comes when he imposes transformation despite his unpopularity.
Various concepts describe the favorable behavior of a leader with regard to “transformational leadership”. In Bass’ theory, the behaviors of a transformational leader are grouped into four categories (the so-called “four I’s”):
- Idealized influence (role model function): The leader is perceived as having integrity and credibility. He or she serves as a role model for the employees, by which they guide themselves both personally and professionally.
- Inspirational motivation: With an inspiring vision, transformational leaders try to increase the intrinsic motivation of their employees. They can convey meaning and significance and thus make clear what is worth investing time and energy for. The first two categories were initially referred to as the charisma of a leader.
- Intellectual stimulation: The manager tries to stimulate the creative and innovative abilities of his employees so that they feel positively challenged and contribute to optimizing business processes.
- Individualized consideration (individualized support): As “consultant, coach, teacher and mother figure” the manager addresses the individual needs of his employees and develops their skills and knowledge in a targeted manner. This is particularly successful in identifying individual needs, awakening motives and developing self- confidence.
Figure – Transformational leadership styles
Transformational leadership, driven by energy and enthusiasm
If a leader takes an active part in developing a dream and mission for the future, an organization may be changed. So people (followers) are a part of the dream. The “transformation master” is the one who is in charge of revitalizing the organization. He determines the need for improvement, develops new goals, mobilizes interaction in these goals, and gradually changes the company.
John Adams identifies six emerging themes of the transformed organization (Adams, 2005):
(1) vision and purpose,
(2) new perspectives (paradigms),
(3) human empowerment,
(4) performance and excellence,
(6) the organization itself as an energy field.
SAIDAL SARL and Leadership
Burns (1978) states “leadership is one of the most observed and least understood phenomena. Indeed, this paradox has haunted many researchers trying to understand leadership, its manifestation, and its component parts for centuries” (Burns & Rechy, 2004).
Currently, SAIDAL group has a bureaucratic type of leadership which is centered around the CEO of the organization and then followed by the executive committee handling the pharmaceutical portion and the other functional sections.
Figure . Span of Control CEO – SAIDAL Group
The span of control within this structure is so high that the relevant managers sometimes do not have the required authority rather than the CEO’s direct involvement.
The most suitable Leadership for SAIDAL SARL
According to the research evidence and the industry recommendation, the most conducive leadership style to promote performance in SAIDAL would be a mix of situational and transformational leadership.
SAIDAL group has a diverse set of divisions as their core business units and also other functional unit has much of diversity. Other than that, it has a diverse workforce starting from the lowest level to the highest level of the hierarchy. Not only that, in the earlier chapter we have identified that there are many issues related to the human resource management function of the company. So the company has much of a focus on changing marketplace with a diverse workforce. Therefore, one definite factor that can be seen in the organization for sure is “change”.
To take effective and efficient outputs from these types of situations, the company needs leaders who can adapt and act accordingly rather than some kind of bureaucratic leadership style. A situational type of leadership is means having a good bond with the employees according to the situation and transformational means handling of every situation in an entrepreneurial mindset.
Therefore, it can be concluded that a mix of Situation and Transformational Leadership styles will be suitable for SAIDAL Company to promote its performance and stimulate its global growth.
Global Staffing Policies
What is outsourcing
Outsourcing is the corporate method of recruiting a team outside of a corporation to provide tasks and produce products that the company’s employers and staff have historically done in-house. Outsourcing is a process that businesses typically use as a cost-cutting step. As such, it will influence a wide variety of workers, from customer service to development to back office (Quinn & Hilmer, 1994).
HR outsourcing (also known as HRO) is the practice of sub-contracting the roles of human resources to an outside provider. Business process evaluations have driven many companies to conclude that sub-contracting some or all of the non-core operations to specialized providers makes economic sense.
Types of Human Resources Outsourcing
Business process outsourcing (BPO)
An external provider handles individual HR tasks, such as managing payrolls, training, and perhaps the entire human resources function (Gene M. Grossman, 2005). BPO helps an organization save money and also spend most on key operations
- Outsourcing of back offices: this includes outsourcing of internal business roles such as accounting, HR, etc.
Outsourcing at the front office: entails outsourcing customer-related activities such as technical assistance, repairs, etc.
Shared Service Outsourcing
This is the outsourcing where HR’s operations or logistical components are subcontracted to an external provider. These can include the workers’ personal interface.
Application Service Outsourcing
Application (and facilities) HR outsourcing operation, where foreign vendors are in charge of the technical (and physical) services to support human capital.
Advantages of Outsourcing
There are a lot of advantages of outsourcing HR functions to a company namely,
- Reduction in cost
- Cost reduction for salaries
- Reduction of cost for benefits given to HR professionals internally
- Reduced costs in recruitment and training
- Legal penalties and issues are handled by the third party
- Less time required for HR related activities
- Lower mistakes as the work are done by a professional outsourcing company
Managing workers today is challenging and needs advanced expertise to keep the legislation from getting out of hand. Many small business owners simply don’t have that expertise, and often make payroll mistakes, don’t keep the proper paperwork on employees, or don’t have good personnel management procedures in place. Not only can these information gaps pose risk to the organization and cost money, but they also mean business owners are wasting more time on these activities than is required (Adams, 2005).
Through outsourcing human resources, it is possible to devote time to other tasks that are more useful to the company. Rather than wasting money with paperwork or struggling with accounting and compensation problems, the company can focus more on setting targets, designing a business strategy, promoting and sales, both of which would potentially pull in more cash.
- Leads to the improved hiring process
HR consulting outsourcing streamlines the recruiting process, too. A PEO (Professional Employer Organization) will help you build an effective recruiting process and ensure that every component, from the original job listing to the interview process, is structured to attract top talent. Many HR agencies will also handle the early stages of recruiting and selection for you, and you just need to get interested until you’ve whittled down the list of applicants to the most qualified candidates (Brockbank, et al., 1999).
A PEO will also assist with the on-boarding process after employees are recruited. Surveys suggest that workers are more likely to assimilate quicker and more effectively into the organizational community when a company has a specified and clear onboarding procedure. It makes us find the running ground which results in lower turnover rates. Then after workers are set up a PEO can help track workplace efficiency, free up time and provide unbiased perspectives.
Disadvantages of Outsourcing
Outsourcing that is most widely regarded as offshoring has its pros and cons. Most of the time, outsourcing gains outweigh the negatives of outsourcing (Quinn & Hilmer, 1994). While there are many benefits to outsource, the strategy still has drawbacks, such as:
- Loss of control and exposing confidential data
When an enterprise outsources HR, accounting and recruiting services, there is a possibility that sensitive client details will be revealed to a third party
- Delivery extensions and synchronizing difficulties
In the case that the company does not select a correct outsourcing provider, some of the typical trouble areas include extended production periods, substandard product performance and incorrect obligations categorization. Such aspects are often harder to control within a company, rather than through an outsourced partner
- Incurring of higher costs by hidden costs
Although outsourcing most of the time may be cost-effective at times, the hidden costs of signing a contract whilst signing a contract across international borders may pose a serious threat.
- Loosing of customer focus
An outsourced vendor can tend to multiple organizations ‘expertise needs at a time. In these cases, vendors can lose full commitment to the tasks of your organization
Etisalat Case Study
What is Etisalat?
Etisalat is a Middle Eastern top telecommunications provider. It is one of the six GCC Arab countries ‘ biggest corporations. It has a market value of approx. 23 Billion USD with sales in excess of 10 billion USD a year. Its main base is in Abu Dhabi, UAE.
Figure 10. Etisalat Head Quarters in UAE (source: news.microsoft.com)
According to the case study, Etisalat has taken the outsourcing decision in the year 2012. This decision has been taken due to many reasons,
Why Etisalat Needed Outsourcing?
Earlier in February, Etisalat announced a 24 percent decrease in its net income to AED5.8b (1.1 billion in 2011 (mcit.gov.eg, 2013).
Etisalat having to focus more on their core business activities, it has become much easier for them to outsourcing customer operations so that a professional organization will take care of those. Following benefits were expected from that action
Benefits of Outsourcing for Etisalat
The following advantages were gained by the outsourcing program that Etisalat has done.
- Etisalat should concentrate and spend its resources on core business areas, such as providing consumer telecommunications services.
- Customers of Etisalat will expect improved services as Customer Service is now outsourced to a provider specializing in the provision of customer service.
- The outsource provider also shares the elements of risk reduction and handles them even better.
- The key advantage is cost savings. Outsourcing means cutting running costs. This would also reduce the cost of recruiting costs, as it can be very costly to hire local people
- Whenever more staff is required, outsourcing firms will really benefit by supplying additional employees before the job is done. And greatly relieves the burden on the full-time staff.
Recent years have been marked by accelerated economic globalization and competition and rising investment costs. In the business world, only the most competitive companies can withstand the challenges of globalization and competition that is becoming increasingly ruthless.
Whatever its activity, a company must face and master the competition from national and international companies. Its strength lies in the quality of its products which are the result provided by its staff. It must ensure that it maintains competitive productivity in a context where technological innovations cross borders without delay. Therefore, the more qualified and motivated the personnel is, the more positive their performance will be. This, in turn, makes the company more competitive. Rigorous human resources management becomes indispensable.
Therefore, in achieving those goals SAIDAL has to work more on improving its Human Resource Management system to face the world with that much competition in hand. Using this analysis, it can be concluded that the SAIDAL HRM function need to be reorganized as the issues in recruitment, payroll work, employee motivation, etc are identified as the major drawbacks of the organization. Therefore, proper guided measures are needed to be taken.
Leadership is a symbiotic relationship produced jointly by leaders and followers that implies that the follower has an active and functional role complementary to that of the leader in the leadership process. When it comes to SAIDAL for leadership, similarly major reforms of leadership style are needed to thrive in today’s fast-moving challenging strategic world. Therefore, by stepping out from the current bureaucratic type leadership it is needed for leadership of more towards situational and transformational leadership
For an organization to be effective and competitive, it must take into account its HRM and the changes in its internal and external environments, and it is in this way that it can meet its challenges and thus be able to achieve its objectives along with the incorporation of a good leadership style.
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