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Introduction
As the business environment changes rapidly and competition becomes fierce, companies focus on their core competency and outsource non-core functions to outside vendors. Recently, companies are increasingly adopting Business Process Outsourcing (BPO) that outsources non-core business processes as wells as supporting information technology (IT). [6] Gartner (2003) Group defines BPO as:
... the delegation of one or more IT-intensive business processes to an external provider that, in turn, owns, administrates and manages the selected processes based on defined and measurable performance metrics.
BPO permits the company to focus on its core-competency by outsourcing constantly changing business processes and supporting IT ([34] UN, 2003). BPO can leverage provider's leading-edge technology as well as their economy of scale, gaining significant reduction in costs.
One report indicates that HR BPO market grows rapidly, with a revenue growth rate of 45-50 percent annually for the next several years ([22] Murphy et al. , 2002). In Korea particular, 99.7 percent of the firms are small and medium enterprises (SMEs) with less than 300 employees ([12] Joo, 2004). In contrary to their size of contribution to Korean economy, SMEs have difficulty of recruiting and retaining quality employees as indicated by a survey. The survey reports that only 9.9 percent of the surveyed people prefer to work in SMEs as opposed to 76.4 percent wishing to work in the larger company ([16] KFSB, 2003). As results, Korean SMEs increasingly recognize the importance of HR management to remain competitive. However, HR is not their core competency. For Korean SME, BPO might be a solution to resolve their current problem in HR.
The goal of this research is first to investigate the outsourcing needs of Korean SMEs in each of the following HR sub-processes:
- recruiting;
- training;
- HR administration;
- payroll; and
- benefit processes.
Then, the outsourcing needs are analyzed against the characteristics of the companies such as company size, operating environment, culture and IT maturity. Lastly, BPO service models are developed according to the characteristics of the company.
Companies are increasingly recognizing the interdependency of the tasks within and across HR sub-processes and the importance of coordination among the tasks. Therefore, BPO service models in this study are developed in a way that the series of interdependent tasks within...