«IJM Outsourcing of human resource 26,4 management services in Greece Eleanna (Anna-Eleni) Galanaki and Nancy Papalexandris Athens University of ...»
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Outsourcing of human resource
management services in Greece
Eleanna (Anna-Eleni) Galanaki and Nancy Papalexandris
Athens University of Economics and Business, Athens, Greece
Received September 2003
Revised February 2004 Accepted June 2004 Purpose – Outsourcing is gaining considerable popularity in the ﬁeld of business services and management. The purpose of this paper is to illustrate the practice of outsourcing human resource management (HRM) functions, such as training, stafﬁng, rewards and restructuring, in Greece.
Design/methodology/approach – The analysis draws upon both primary and secondary data.
The ﬁndings of the 1999 CRANET survey and a study on the companies that offer HRM services in Greece are used to set the frame of analysis. A series of in-depth interviews with HR managers and senior HRM consultants are used to support the quantitative data.
Findings – The analysis suggests that the Greek market of HRM services is still at an initial stage of development, with limited credibility, while the customers lack the experience of managing outsourcing relations and are reluctant to establish a partnership- type HRM outsourcing agreement.
Considerable differences are identiﬁed between the Greek market for HRM services and those of more developed markets.
Originality/value – The description of the Greek market of HRM services can be useful to vendors and users of HRM services, as well as researchers dealing with outsourcing in small markets.
Keywords Outsourcing, Human resource management, Greece Paper type Research paper Introduction Human resource management (HRM) outsourcing means “having a third- party service provider or vendor furnish, on an ongoing basis, the administration of an HRM activity
We are proposing the additional following categories, which may also be of interest
and have also been repeatedly mentioned in the literature (Cook, 1999):
performance appraisal systems;
organisational climate and culture.
Objectives of this study
Given this background, this paper examines the following issues:
(1) Which HRM services are mostly used by Greek companies and why?
(2) How much has the external HRM services market has developed in Greece?
(3) Is there some particular pattern in the use of outsourced HRM services, which could be identiﬁed?
(4) What is the future for outsourcing of HRM services in Greece?
Before answering these, some background detail on Greece is provided. The Greek economy is mainly comprised of small and medium sized companies (SMEs) (Observatory of European SMEs, 2002a, b). The dominance of SMEs (companies with less than 50 employees) and middle-sized companies (companies employing 50-250 employees) in Greece implies that outsourcing potentially may have more impact than in other countries, as it allows the small sized client to enjoy the beneﬁts of the economies of scale achieved by the vendor.
Furthermore, it is interesting to study the development of the HRM services market, under the light of a somewhat delayed development of the HRM function in many Greek companies. In the mid-1990s and in some cases even now, the HRM function in many Greek companies was performed either by the CEO, or by the ﬁnancial manager (Papalexandris et al., 2001). Therefore, this study may provide insight into how the market for external HRM services has developed in a country where the HRM function is generally still under-developed in-house.
Two sources of quantitative data were utilised for the purposes of the current study:
the CRANET Network Survey of 1999 and the ICAP Greek Financial Directory (ICAP, 2002). The CRANET Network Survey, 1996-1999, was run in 25 European countries and examined the HRM practices, both cross-nationally and over time. The second source of information, focusing on the providers of HRM services, was the ICAP Greek Financial Directory for 2002, which gathers the majority of the companies operating in Greece.
IJM The quantitative data were further supported by qualitative analysis. Five in-depth, semi-structured interviews were conducted with prominent HRM consultants and 26,4 professionals in companies that provide HRM services and another ﬁve interviews with top HR managers who are involved in the decision and management of outsourcing of their companies.
384 Quantitative data The CRANET cross-national survey, last run in Greece in 1999, provides information on the extent of use of outsourcing for the provision of HRM services. Speciﬁcally question 2b of the 1999 questionnaire identiﬁes four broad categories of HRM services,
(1) pay and beneﬁts;
(2) recruitment and selection;
(3) training and development; and (4) workforce outplacement and reduction The results reveal that the most outsourced HRM function in Greece is training (60.3 per cent), followed by recruitment and selection (34.6 per cent). Surprisingly, pay and beneﬁts also appears to be extensively outsourced in Greece (24.3 per cent), while workforce outplacement and reduction is outsourced by fewer companies (4.4 per cent) Figure 1 illustrates the ratings of Greece in comparison with other countries, in terms of the outsourcing of each of the above HRM services, according to the CRANET results. Table I summarises the number of countries with a higher ranking in outsourcing of each HR function than Greece.
The results suggest that, in Greece, fewer companies outsource their HRM services.
This is most evident in the case of services in “outplacement and downsizing”, and least in the one of “pay and beneﬁts”. Some explanation on these results was revealed by the interviews conducted with HR managers, where “external collaborators” is the exact term in Greek for “HRM providers”, in the ﬁeld of pay and beneﬁts. There, the respondents usually referred to the use of payroll bank accounts and to the provision of salary surveys. This could be the reason for the reported high outsourcing of pay and beneﬁts in Greece, according to the CRANET results. On the other hand, the outsourcing of pay systems design, a service that HR providers can offer, is not developed in the Greek market, according to the HR managers and HRM vendors interviewed.
In order to have a clear picture of the other side of the outsourcing relationship, we looked at data from HR providers. The ICAP Greek Financial Directory (ICAP, 2002), provides representative data from 22,000 Greek enterprises of all sectors of the Greek economy. Of these, 114 companies whose activity involved services in HRM were identiﬁed. Table II summarises the type of services that are offered by those companies, according to the description of their activity contained in the ICAP Directory.
Of these 114 companies, 40 per cent were founded within the period between 1996 and 2000 and 22 per cent from 1990 to 1995. Furthermore, 76 per cent of all those companies experienced a proﬁt growth of up to 700 per cent. Those ﬁndings illustrate the recent boost in the sector of HRM services and call for further, in-depth study.
Outsourcing HRM services in Greece
Findings from CRANET and proportions in the ICAP Greek Financial Directory, under the section of HRM services providers Outsourcing recruitment services, according to the ICAP Greek Financial Directory, could be attributed to the fact that the ICAP Greek Financial Directory ﬁndings refer to 2002, HRM services in while the CRANET ﬁndings refer to 1999.
Greece In the case of pay and beneﬁts, though, many companies use such services (24.3 per cent), while only 1.7 per cent of the HRM services vendors are specialised in this particular sector. This may be because these services are currently offered by other providers, such as accountants and banks. Moreover, the ﬁeld of “pay and beneﬁts” services also includes the salary surveys, which are conducted by one provider for the sake of several clients of the same sector. This also contributes to a higher percentage of customers as compared to vendors of “pay and beneﬁts” services. Greater detail and explication is provided by the qualitative data from the interviews.
Interviews As mentioned above, semi-structured, in-depth interviews were conducted with ﬁve consultants in the area of HRM, and with ﬁve HR managers. Companies of all sectors and sizes were represented in the interviews. The interviews aimed at collecting
information and the personal insights of the respondents on the following issues:
The HRM services commonly outsourced by Greek companies.
The reasons why Greek companies outsource HRM.
The aims sought for by the companies that outsource HRM.
The proﬁle of Greek companies that outsource part or all their HRM services.
An insight to the development of the HRM services outsourcing market.
An evaluation of the quality, reliability, development and competition in the.
Table III summarises the type of company, the number of employees and the services offered by each of the HR vendors that were interviewed. The interviews, though only ﬁve, covered a large range of HR vendors: a large multinational consulting ﬁrm, two small Greek entrepreneurial ﬁrms, and two consulting ﬁrms that lease or are the exclusive representative of HRM tools of foreign agencies. The spectrum of services that these companies offer varies from solely training or headhunting to total coverage of all HRM services, including strategic HRM consulting. The respondents are either partners or very senior consultants within their company.
Table IV summarises the type, size and sector of the companies that were examined through in-depth interviews with the HR manager/director. HR Manager A is the HR director of a large transport and cargo company; HR Manager B is the HR director of a large, multinational car manufacturer; HR Manager C is HR manager at a very large banking group, employing 7,000 people and HR Manager D is the HR manager of a medium-sized Greek textile manufacturer. Finally, Manager E is a senior line manager of a large Greek pharmaceutical company that does not have an HR department, so the HR functions are carried out by the line.
vendors interviewed reported that their customers include large, mainly multinational companies.
A major ﬁnding of the interviews was the identiﬁcation of different patterns of HR outsourcing, particularly in relation to the size of the outsourcing company. The interviewees, when asked about the proﬁle of the outsourcing companies, identiﬁed three main groups of companies that outsource HR services.
A typical group consists of smaller companies, which do not ﬁnd it necessary to have an internal HRM department and instead outsource their HRM functions. This is the case described by HR Manager D, where the company from small entrepreneurial became part of a larger group of companies. In this transition, all the HRM functions Outsourcing were provided by an external consultant, who also dealt with the problems raised due to the acquisition. After the transition was completed, HR Manager D took up the HRM HRM services in function.