Question

Several types of decisions involve incremental analysis (i.e. Relevant Costing). Discuss how HR can assist with analyzing the pros and cons of retaining an Engineering Department of 20 staff or outsourcing overseas.

Answer 1

Human resource department has a very important role of hiring and letting go of people and normally it is the hiring department which does all this communication. Incremental analysis is one very efficient way of handling people’s productivity. Due to cost sensitiveness many companies choose to outsource some part of their job to emerging markets where things can be done at very low cost then doing the same task in the developed market. The HR division can look at the pros and cons of outsourcing the task. If the task is being outsourced then probability there is less control on the quality of the task, there is certain probability of divulging of trade secrets, in this case, codes written by engineers are sensitive to error and in the long run can cause disruption. The HR can also justify that even though the cost seems to be low but if you consider the currency exchange affect and tax rules the net profit might not be that significant to outsourcing the task. The HR can also make a point to outsource the task because then you have access to large pool of talent and can be done at the cost-effective rate. In the short-term you might face quality issue but once they get proper training you can expect them to maintain good quality and can get the job done in a cost-effective manner.