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Firms learn to put employees first

When it comes to outsourcing, Slovaks still have a lot to learn. Take human resources. While HR is among those activities that foreign companies outsource the most, many Slovak managers are reluctant to follow suit.

Human resource suppliers maintain that companies do best when they can concentrate on their core business, whether it is manufacturing, banking or retail. Payroll, recruitment, employee motivation and training - those are activities best left to experts, say outsourcing experts.

Martin Novotný, Co-Founder and Chairman at Amrop Jenewein Group, a European recruitment and consulting company, told The Slovak Spectator that 50 percent of all the business challenges facing C-level executives (CEOs, CFOs, CTOs) are directly related to human resources. That is why, Novotný insists, it is beneficial for companies to offload the burden to seasoned professionals.

According to HR experts, Slovak companies are well informed about the advantages outsourcing can bring. Why, then, are they reluctant to outsource HR? Market professionals say it is a mistaken perception of cost.

Mariana Turanová, managing consultant with Target SK, explained: "I believe top managers in Slovak companies are well aware that outsourced services are usually of higher quality than in-house services. The initial cost [for outsourcing HR] is the factor that, in most cases, decides whether a company will rely on an outside supplier. However, a company can very often save money with outsourcing! One just needs to do a realistic calculation."

Gerard Koolen, managing partner at Lugera & Makler, believes companies are asking the wrong questions. He told The Slovak Spectator: "Companies mainly ask 'What does it cost?' They rarely ask 'What is the added value?'. Few in-house HR departments and top-level management teams understand that outsourcing HR can be a money-saving, even profitable venture for the company."

Koolen added that fear among in-house HR departments sometimes thwarts outsourcing. "The more a company outsources its HR activities, the smaller the internal team becomes, and this is against the interest of many HR managers."

Despite the general reluctance of Slovak companies to engage HR outsourcing suppliers, a survey conducted by Amrop Jenewein Group suggests that HR outsourcing is becoming more popular in Slovakia.

According to Novotný, human resources know-how is relatively new for Slovaks. Before the Velvet Revolution, only personnel departments existed, most of them focussed on administration. Human resources departments, unlike personnel departments, assume that human capital - a company's employees - is the company's most vital resource. The survey indicates Slovaks are starting to see and appreciate the difference.

In the Amrop Jenewein survey, 200 human resources managers and general managers of important Slovak companies were asked a variety of questions. "Two thirds of the respondents considered [human resources] outsourcing a solution with the potential to fulfil their expectations and demands related to quality as well as cost savings," Novotný said.

Most believe that a new market economy and the arrival of foreign investors initiated the shift. Internationally successful companies imported needed know-how and thus introduced Slovak managers to effective HR systems.

At first, HR outsourcing firms in Slovakia delivered services like payroll, and recruitment support. As time went by, companies started demanding more in terms of ongoing education, training and motivation, and evaluation services.

"Personnel consulting companies began providing more and more complex HR outsourcing. But still, HR outsourcing is most often delivered in a few specific areas: recruitment, training and employee motivation," Novotný explained.

Turanová with Target SK says that among middle- and small-sized companies, it is very popular to outsource payroll.

"In my opinion, the most frequently outsourced HR activities are still in payroll. Recruitment is another commonly outsourced activity, and I believe this trend will grow in the future. Training activities have been outsourced for a long time, and many companies now use external trainers to support their in-house personnel."

Turanová sees a growing interest among companies in outsourcing activities like coaching, assessment centres and development programmes.

Koolen of Lugera & Makler thinks the most outsourced HR activity is recruitment and training. He believes companies are starting to look at assessment outsourcing, and personnel leasing is developing, too. But he says that "real HR outsourcing - outsourcing the entire HR function" is still a long ways off.

Whatever the level of outsourcing selected by a company, experts say HR outsourcing is successful only when companies work as partners with outsourcing firms. A trusted relationship, they say, yields the greatest benefits.

Novotný told The Slovak Spectator: "A relationship on both sides based on trust, a fair approach, and shared risk and successes is an inevitable principle in profitable outsourcing scenarios. Only in such a way is it possible to reach a win-win situation."

Koolen at Lugera & Makler agrees. For HR outsourcing to pay off, he says, the company and HR firm must trust each other. "With outsourcing, the traditional relationship between customer and supplier must disappear and instead a true partnership must take its place before outsourcing can be beneficial for both partners."

Koolen says the advantage of HR outsourcing is to gain access to professional know-how. The danger, however, is choosing poorly.

"The risk can be that you select an outsourcing partner without having a real partnership," said Koolen.