HR AND OFFSHORING: INPUT OFTEN COMES LATE IN THE GAME

A new Society for Human Resource Management (SHRM) survey provides a glimpse of how HR professionals
participate in handling offshoring and its repercussions. Among the findings: Only 35 percent said that HR was
involved in the offshoring process from an early stage, although HR does typically play a major role in restructuring
the organization's workforce as a result of offshoring.
HR most often is "not involved in either the decision to offshore or in the early planning stages of the offshoring
process," comments Jennifer Schramm, manager of workplace trends and forecasting at SHRM. According to survey
respondents, HR's initial involvement in offshoring began with the:
 Start-up phase: initial decision-making process—35 percent.
 Planning phase: after the decision was made to offshore—30 percent.
 Implementation phase: before the offshore unit was operational—12 percent.
 Other—2 percent.
 Not at all involved—21 percent.
"Unless HR assumes a greater role in the decision-making and planning process, the resulting challenges and
pressures on HR could grow greater," Schramm says, "especially since the vast majority of those surveyed believe that
the use of offshoring by their organizations is likely to increase."
A Vital Role
However, on a more positive note for HR, "When employees are displaced as a result of jobs being moved to other
countries, HR professionals are the first to deal with the employee impact," says Evren Esen, the SHRM survey
research specialist who authored the 2005 Offshoring Survey Report. She adds that "from training HR professionals
from offshore sites in the home organization's corporate culture and policies, to developing strong channels of
communication between global satellite offices, HR's involvement is crucial in effectively managing cross-border
human capital."
And once offshoring was underway, almost all respondents indicated that HR at the U.S. location was involved in
some way with the offshore workforce; only 5 percent indicated that HR was not involved. U.S.-based HR
professionals spent time at offshore locations to ensure that organizational policies and practices were implemented,
according to 52 percent of respondents—although this was twice as likely to occur in large organizations (66 percent)
as in small (32 percent).
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"Once underway, only 5 percent indicated that HR
was not involved with the offshore workforce."
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In the survey, conducted by SHRM in May 2005, "offshoring" was defined as "cross-border outsourcing," or the
practice of U.S. organizations operating business units or functions in other countries (including Caribbean and
Latin/South American countries, as well as Canada—a practice that is sometimes called "nearshoring").
The Wave of the Future
"HR's role in boosting productivity through human capital and workplace culture, even as the scope of the workplace
extends across the globe and spans very different cultures, will continue to grow," Schramm predicts.
"National statistics show that organizations are offshoring jobs to other countries at an ever-increasing rate," Esen
concurs, a development backed by the survey's findings, which show 29 percent of HR professionals reporting that
their organizations presently offshored one or more business units, while another 4 percent indicated their
organizations were discussing the possibility. The top two reasons cited as the impetus for offshoring: lower labor
costs (76 percent) and increased overall profits (50 percent).
Despite HR's typical late entry into the process, 79 percent of HR professionals still indicated that HR's role has
become more strategic due to offshoring.
And while the offshoring of white-collar jobs is increasing, the majority of HR professionals (73 percent) were "not at
all" concerned that offshoring would impact their jobs.
For many, technology and HR outsourcing within U.S. borders were seen as more of a threat to HR jobs than cheaper
overseas labor. Of the 64 percent of organizations that were not presently offshoring, about half (49 percent) cited
increased use of technology as the major means by which their companies sought to maintain advantage in the
marketplace, and 12 percent had outsourced jobs within the United States.
Additional Findings
Among other survey results, the types of business units most often offshored were:
 Manufacturing/production—43 percent.
 IT and customer service/call centers—both 29 percent.
 Computer programming—22 percent.
 Engineering—20 percent.
 Accounting—18 percent.
 Human resource—16 percent.
 Research and development—13 percent.
The countries where most offshored work took place were:
 India—53 percent.
 Mexico—36 percent.
 China and Canada—both 33 percent.
 Brazil—18 percent.
 Philippines—15 percent.
The most frequently cited challenges for HR were:
 Language barriers—51 percent.
 Ensuring the flow of information—49 percent.
 Consistency of employment policies/practices—46 percent.
 Time zone differences—44 percent.
A Full Partner
Offshoring is "particularly significant from the standpoint of the human resource profession in terms of its impact on
U.S. human capital," says Esen. "This puts HR professionals in a prime position to regulate the effects of offshoring
and its ramifications for organizations and for the existing workforce." The remaining challenge, however, is for HR to
step up and become a strategic partner in the initial offshoring decision making process.
"The participation of HR professionals in offshoring is necessary from the beginning stages of exploring the idea of
offshoring as a viable option to the implementation stage," Schramm emphasizes. "HR should be involved in
spearheading the country selection process—investigating the most viable offshore labor force—and then in
orchestrating the recruitment of qualified staff."
Moreover, even if the organization chooses to use a third-party supplier to manage the offshore work, "HR will need
to ensure that U.S. employees whose jobs are threatened are supplied with the outplacement help they will need,"
Schramm says. "HR can also provide a broader perspective than the players in the organization who may rush into
offshoring decisions for purely financial reasons. A balanced approach to offshoring can prevent potential obstacles
and challenges that all offshoring ventures face."