Running A Human Resource Outsourcing Business In A Growing Economy Like Nigeria

Outsourcing as a management practice simply means to transfer work responsibilities and decision rights to someone outside an organisation. Outsourcing is actually made up of two words, “out” and “sourcing”, a concept developed from American terminology “outside resourcing”.

When a company decides that the risk of managing in-house is greater than outside, then it is time to outsource. However, let me clarify that outsourcing goes far beyond outsourcing of humans. Other forms of outsourcing are Professional Outsourcing, Multi-Sourcing, IT Outsourcing, Process-Specific Outsourcing, Business Process Outsourcing, Manufacturing Outsourcing, Project Outsourcing and Operational Outsourcing.

For all outsourcing types, the three key reasons for enagaging outsourcing and in order of significance are, Cost Savings as outsourcing moves a busineses costs from variable to fixed. The second reason is that outsourcing enhances efficiency for the business, and thirdly delivers competitive advantage from the access to skilled manpower, and ability to focus.

There are two major challenges with outsourcing practice in Nigeria. The first is the fact that the barrier to entry is low. That is because outsourcing practice as a business model is not regulated. So people that either genuinely lack professional capacity, or that are intentionally fraudulent get to run businesses supposedly providing outsourcing services.

This leads to the second challenge, with many organisations engaged in casualization instead of outsourcing. Casual laborers have no labor certified benefits, while Outsourced staff have full Labour certified benefits. Though a new law passed by the Nigerian National Assembly regarding casualization and contract staffing is meant to stem this tide, the lack of enabling legislation to guide entry and professional practice of outsourcing continues to hinder the few professional operators.

A related third challenge is the fact that the users, usually corporate clients dictate the contract terms a hundred percent, expectedly to the detriment of the service provider and staff managed.

The fourth and last major challenge is the long drawn process of litigation when there are disputes, thus frustrating conflict resolution, and ultimately the business of outsourcing in Nigeria.

My experience through the years is that an outsourcing business would thrive better in Nigeria when operators work together to confront the challenges. This view led our Resource Intermediaries Limited to join the Association of Outsourcing Professionals of Nigeria (AOPN), currently led by Dr. Obiora Madu as President.

Membership of the AOPN is open to Outsourced Services Providers, Outsourced Services Buyers, Regulators and Outsourcing industry data Buyers. The AOPN Vision Statement is “To create a catalyst hub for enhancing the outsourcing profession.” Working with other members, the association continues to serve as a platform for creating professionals and institutionalizing professionalism in the practice of outsourcing in Nigeria. I have observed, and indeed benefited from the associations lead to ensure compliance with ethics of the profession, build and strengthen outsourcing support and capacity of practitioners, while engaging government through advocacy, to promote legislation that positively impact the outsourcing industry and practitioners.

While Outsourcing is not necessarily right for all organisations or for all situations, it does have significant economic benefits when done right, and even society at large benefit. At the heart of Outsourcing is the focus by the User on what their organisation does best (area of core competence), and then outsource to the RIGHT Provider, what they do not do so well. This process provides expertise, flexibility, and scalability to the User, thus reducing waste while optimizing its operations. While Outsourcing may often be more expensive than full time staffing in absolute terms, factoring in cost of expertise, flexibility and scalability would show that Outsourcing always provides economic value if the right Provider (emphasis on The Right Provider) is engaged. In addition, many people who would have otherwise been unemployed would secure employment amongst several other related social benefits of Outsourcing as a business model.

Let me provide a bit more details on frequently asked questions to shed more light on Outsourcing in general.

Why Do Organisations Outsource?

1. 49% do so to reduce cost
2. 38% do so to enable them focus on their core business
3. 10% do so to improve speed to market and quality of their service
4. 3% do so to take advantage of innovation

What should be outsourced?
1. Support services for which the organisation does not derive any comparative advantage in developing or maintain the service in-house
2. Any service for which future leaders of the company are not likely to come from e.g., cleaners or drivers in a bank

What are the risks in Outsourcing?
1. Loss of Control of staff outsourced
2. Fear of poor performance by the outsourced provider
3. Inability to achieve desired results for which outsourcing was undertaken

How would an organisation best mitigate the risks?
Make sure you enagage a professional Outsourcing Service Provider. Resource Intermediaries Limited is strongly recommended, with our pedigree and client evaluation through our 15 years that can be independently verified.

Nigerian Outsourcing Firms are competent in helping the government from the menace of unemployment. First I must emphasise that outsourcing is not a career job. It is generally a platform for building skills and raising some capital for the employee to either get career jobs or become entrepreneurial. Now, most Nigerian outsourcing firms like Resource Intermediaries Limited that I manage have processes in places to facilitate a recruitment exercise efficiently and in a way that protects the dignity of the applicant. Outsourcing firms in my view are doing the best they can to ease unemployment but are constrained by the prevailing business terrain full of uncertainty in the years gone by.

The mistake that government makes is to focus on the unemployed in seeking to employ as many as possible. What government ought to do is to focus on creating the enabling environment for people to create small-scale businesses that would in turn employ staff as outsourcing makes a positive impact in today’s business. Note that anything that makes hiring staff more expensive like multiple taxes, legislated increased benefits like pension and Health Management schemes will discourage job creation. Numerous Taxes for example and the overall tax burden make job creation more difficult and less rewarding for the employer.