PROJ-410 Week 7 Case Study 3 (Cost Savings of the Outsourcing Contracting Process)

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Human Resources Outsourcing – Executive Summary: Cost Savings Introduction to Summary ❖ Outsourcing/ Contracting Process Summary – I have been tasked with preparing an executive summary ... document that focuses on the cost savings of the outsourcing/contracting process for the business process(s) that will help increase profitability and efficiency within our company. With a staff of just over 500 and four branch stores, Best Mart Ltd. has seen it fit for the organization to outsource a company to handle its Human Resources and Employee Services Department. Operating a mega supermarket brand can be extremely costly and the main focus of the organization is to provide quality good and service to consumers. Managing a staff of this magnitude can be an extremely challenging, costly and time consuming task. No one Human Resources Manager would be able to cover all the tasks required for the large staff at Best Mart Ltd. ❖ An internal investigation and study was conducted into all the requirements of the Human Resources service provider and whether or not it would be beneficial to the company and an ease of the Company’s expenses to outsource. I will further elaborate on the cost savings that the company will incur once having the service outsourced. The decision will have a positive outcome towards the professionalism and profitability of the Company. Current Situation ❖ Best Mart Ltd. has taken the decision to outsource the HR services to a professional Human Resource and Employee Services Agency that will efficiently manage all staff relations on behalf of the company. In this modern day, Human Resources has become one of the most important aspects of any business, regardless of the nature of that business. It requires the full attention of a professional team, especially in an organization that employs such a large number of persons. ❖ The current worth of Best Mart Ltd. is in the arena of some $10 million and have recently surpassed its competition in the close region to now hold the reign as the top supermarket. To maintain its already set high standards, the company’s staff relations being handled by professionals will ensure that the service provided by their staff is top of its kind and at the same time will be saving the company a lot of money by outsourcing. ❖ There a number of reasons why outsourcing can be beneficial to the overall advancement of Best Mart Ltd. which we have analyzed and concluded are well enough motives for the company to take on this initiative for our betterment. All reasons for outsourcing affects the company from a financial perspective and therefore gives all the more reasoning to take the initiative to save the company money. The top 5 reasons for outsourcing are as follows: 1. Allows the company to focus on core competencies – by releasing the HR responsibilities, the company will now focus on strengthening its core business matters such as the sales of their goods and services. 2. Cost savings for the company – HR services is one of the most expensive aspects of a business. Training and development is where most of this money is spent (besides paying out salaries); the specialist and expertise required to train staff would definitely run the company in some huge expenses. HR Managers are some of the highest paid professions. Outsourcing can also help you avoid high overhead costs as well. Adding more equipment, renovations, and more can send your overhead rocketing upwards. Human resource outsourcing lets you avoid these sudden costs by sending tasks that require added expenses to the human resource outsourcing firm for less. 3. Improves compliance to jurisdiction laws and regulations – A compliance specialist or HR professional would have already knowledge of all employee related acts and regulations that companies are to be guided and regulated by. The Company can have legal ramifications if they do not comply with those laws and can be sued, putting the company at risk for financial failure. It is important that this aspect of HR services is monitored closely and taken serious. 4. Improves employee recruitment tactics – Staff recruitment can be one of the most time consuming tasks of an HRM. It takes paying close attention to details and also running a very tight time schedule. It also includes the costly task of advertising posts. 5. Provides access to latest HR related tools and technology – An advanced HR service provider/agency will keep up with the most recent technologies that positively affect the department which includes big-data mining, analytics, virtual workforce leadership, cloud technology and social media. It also requires the expertise on knowing how to use them to meet the HR needs of the company. Some may argue that HR services should remain an in-house business process because of the sensitivity of its nature and the company would basically be subjecting very personal and confidential information to outsiders. I have found however, there is a growing rate of business outsourcing in collaboration with a high level of professionalism amongst HR experts. There are companies today that focus only on HR related matters and whether in-house or outsourced, they are trained in the field of maintaining professional and confidential. HRMs can boost a company’s profits through increased productivity, in turn giving the company true value for money from their employees. I do not see it being detrimental or posing a serious threat to the company’s overall success. Outsourcing/In-house Human Resources and Employee Related Services that Best Mart Ltd. would outsource to a HR agency are as follows: Hiring and Recruiting (as well as on boarding) Comply with FLSA, OSHA and other related legislation Manage Salaries and Benefits Packages Records Management of Employee information Training and Development Staffing and Job Placement Performance Reports Termination, Retirement and Transfers Here is a more detailed breakdown of what is required of the vendor which be shaped into a well-defined scope to provide in the contract as the list of services and specific descriptions. ❖ Maintains the work structure by updating job requirements and job descriptions for all positions. ❖ Maintains organization staff by establishing a recruiting, testing, and interviewing program; counseling managers on candidate selection; conducting and analyzing exit interviews; recommending changes. ❖ Prepares employees for assignments by establishing and conducting orientation and training programs. ❖ Maintains a pay plan by conducting periodic pay surveys; scheduling and conducting job evaluations; preparing pay budgets; monitoring and scheduling individual pay actions; recommending, planning, and implementing pay structure revisions. ❖ Ensures planning, monitoring, and appraisal of employee work results by training managers to coach and discipline employees; scheduling management conferences with employees; hearing and resolving employee grievances; counseling employees and supervisors. ❖ Maintains employee benefits programs and informs employees of benefits by studying and assessing benefit needs and trends; recommending benefit programs to management; directing the processing of benefit claims; obtaining and evaluating benefit contract bids; awarding benefit contracts; designing and conducting educational programs on benefit programs. ❖ Ensures legal compliance by monitoring and implementing applicable human resource federal and state requirements; conducting investigations; maintaining records; representing the organization at hearings. ❖ Maintains management guidelines by preparing, updating, and recommending human resource policies and procedures. ❖ Maintains historical human resource records by designing a filing and retrieval system; keeping past and current records. ❖ Maintains professional and technical knowledge ❖ Completes human resource operational requirements by scheduling and assigning employees; following up on work results. The vendor chosen to provide these services will be on a 9 month time frame to organize the internal structures on the company and meet the requirements and standards of Best Mart Ltd. Also, the vendor will be provide financial reports that show how the monies are being allocated. The vendor will be required to have a team of persons will relay closely with management about what is being done as well as provide updates on employee quarterly reports. Vendor Considerations Outsourcing of Human Resources has become one of the most common business process amongst huge companies with large staff in order to maintain professionalism on that level. The market is wide and therefore when we advertise our proposal, I am most definite that the responses would be of great magnitude. We will narrow down to choose from the top vendors that meet our proposal criteria. A growing company like Best Mart Ltd. will attract responses from vendors who are equally professional and steadfast in their commitment to success as we are. I trust that we will be able to choose from the best of the best and our deciding factors will lead us to conducting business with one single vendor that is capable of handling our HR affairs. The company has to also be financially re Contract Structure Due to the wide range of services, the vendor will provide a unit price service contract. A unit-cost contract will ensure the financial security of Best Mart Ltd. as there would rarely be a surprise when we issue payments to the vendor. At the start of the contract, a unit cost will be established (per employee) and this is what the contract would be guided by in terms of payment agreement. Any other costs that would be incurred would have to be agreed upon by both parties prior to taking action to satisfy that cost or expense. The overall mission of the company here is to cut costs and still secure a cost effective service. Evaluation Criteria The vendor selected has to be evaluated based on the following criteria to ensure that they satisfy all the required aspects of what we seek in a business. It is an effective form of conducting due diligence. The breakdown is as follows: ➢ Clear and concise understanding in the scope of work that the company provided (determined based n their responses to the proposal and solutions) ➢ Overall cost or financial proposal – The unit cost approach will be the most cost effective type of contract to pursue in this case. The company will focus on the lowest possible price with the provision of an evenly suitable quality service. The cost proposal is extremely important as operating a business of this type and magnitude is already an expensive one. The more careful we are with spending where necessary, the better we can manage our finances, maintaining the company’s high profit rate. ➢ Reputation/Experience/References – We will require each vendor’s proposal to include business references from companies that are in some way or the other similar to our company with regards to size and services being requested. ➢ Knowledge and expertise – The necessity for affiliation for strong expertise in the HR field is where we will make it mandatory to provide proof of qualifications of the top personnel of the vendor’s management team as well as who is designated to our company. ➢ Business size and type – We need to analyze whether or not the vendor can handle a company of this magnitude considering the number of employees we manage as well as the number of store branches we operate. The vendor has to be able to manage staff without adding any additional costs on the company beyond what was proposed per unit. Timeline Activity Period (Time frame) 1. Choose the type of bidding process (open or selective) June 6 – 8 2. Identify prospective bidders and analyze whether they are qualified June 9 – 16 3. Prepare the big package June 20 – July 1 4. Advertise and make invitation proposal to bid July 4 – 15 5. Set out specifications July 16 6. Host pre-bid conference July 18 7. Administer bid forms along with instructions to bidders July 18 (At pre-bid conference) 8. Proposed contract documents July 25 9. Offer bid security July 25 10. Modification, interpretations, substitutions and submissions of bids July 26 - 28 11. Open Bidding July 29 12. Select vendor/contractor August 5 13. Officially close bidding (cautious rejection of non-selected bidders) August 7 [Show More]

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