Human Resource Outsourcing: Threat or Opportunity

Human Resource Management
Assignment On:
Human Resource Outsourcing:
Threat or opportunity?
6th Feburary, 2018
Submitted to:
Jayendra Rimal
Submitted by:
Rinky Shah
Term III
1. What questions/issues is the author trying to address? How important are they?
Why?
Human resources outsourcing is when businesses hire companies to
manage personnel functions. That includes administration of health benefits plans,
retirement plans, and workers’ compensation insurance. It also includes hiring,
training, and legal expertise.
In this paper, the author is trying to address that HR outsourcing is an
opportunity for the internal HR department and HR outsourcing as a cost-cutting
instrument gradually reducing HR staff. The purpose of this study is to examine
whether HR outsourcing is a manifestation of a strategic HR focus, a cost-cutting HR
focus or both. Kenter distinguishes four developments playing an important role in the
formation of HR architecture. These are the automisation of HR tasks, The
outsourcings of HR tasks, The devolution of HR tasks to line managers and the
integration of HR tasks into shared service centers.
Outsourcing is the name of the game in 21st century. Companies that want to
be lean and competitive, need to aggressively pursue outsourcing. The flight of key
functions to low-cost nations has happened in a big way in the past and is going to
continue in future also. Like a coin has two sides, Outsourcing can prove to be a pain
in the neck if not addressed properly It can be a game changing strategy for
companies that are on the move. It may prove to be suicidal for companies that are
unable to address key challenges posed by outsourcing - when pursued in an
aggressive manner.
2. What basic assumptions/arguments does the author make? What facts/opinions

does he present? How valid are these assumptions/arguments/facts/opinions in
the light of theoretical development in the thematic field?
The author at first assumes that outsourcing as an opportunity for the internal
HR department. As per the author, outsourcing generates time and resources for
tactical and strategic HR contributions and allows a stronger focus on core activities.
Adding the fact, that outsourcing of transactional and operational HR activities
benefits the strategic positions of HRM. The author, in other hand, also assumes
outsourcing as an HR cost-cutter. Here, outsourcing also means downsizing or
reductions in HR staffs which generate little value to the core competencies of the
organization.
To test this assumption, survey was conducted where data was collected from
1264 Belgian organization, further research hypothesis was formulated. After this, the
method, sample and measures was clarified. Different drivers for HR outsourcing
such as focus on core activities and cost reduction was mainly focused. The
distinction between focusing view and efficiency view was used to develop research
hypothesis. As per the author research, HR outsourcing can liberate HR professionals
from their more routine and administrative tasks to perform a more proactive and
strategic role. Moreover, they assume HR professionals who are more strategically
involved actively consider which activities belong to the core and which are
peripheral. Thus, A strong focus on strategic HRM is positively related to the level of
HR outsourcing.
On the other side, in many studies it is also shown that HR outsourcing
decisions was made to reduce the cost. Increasing competitive pressure has forced
organization to be more aggressive in cutting costs. Outsourcing is one potential way
to achieve this. Thus, a strong focus on cost cutting in HR is positively related to the
level of HR outsourcing.
3. What are the significant empirical/conceptual contributions of or gaps in this

articles?
The research was conducted with the aim to discuss whether HR outsourcing
is a manifestation of a strategic HR focus, a cost-cutting HR focus or both. Various
research, survey was conducted to draw the conclusion. Various analysis was done,
sample collected and measures applied, but still this study contains a number of
limitations that must be addressed in future research.
 The study only considers the breadth of HR outsourcing phenomenon and
consequently only indicates the presence or absence of external provision in
each HR activity. Having two fundamentals characteristics, depth and breadth
can be conceptualized.
 The cross-sectional analysis discussed in the study cannot be used to
distinguished “cause” from “effect”. Does organization that outsource HR
activities spend more time on strategic or organization applying a strategic
more focus on HRM outsource?
 The analyses discussed showed that HR department can release more time and
resources for more strategic HR contributions by outsourcing HR tasks and
delegating people management to line managers. If HR department take more
on strategic roles, it arises many issues as how it develops and manages the
relationship with external providers, line managers and so on. There is lack of
Empirical research in this area, which leaves a number of unanswered
questions. Empirical research is required to identify how the in-house HR
function can manage its multi-sourced functions.
 The present study have not focused on impact of HR outsourcing.
4. What conclusions does the author draw? Are these conclusion justified in the
light of the empirical/theoretical evidence by the author? How important are
these conclusions?
Human Resources outsourcing refers to the practice of contracting a third-
party organization to handle some or all of a business’s HR tasks and functions. When
small business owners or HR professionals consider outsourcing HR, they want to
consider who else is outsourcing, what functions can be outsourced, and to whom
they should outsource. This study have tried to examine whether HR outsourcing is an
opportunity or threat for an organization. Some observers approach outsourcing as an
opportunity as outsourcing creates more time and resources to focus on strategic and
value creating and HR activities. Other observers, however, portray outsourcing as a
threat for the HR department. Here, outsourcing is seen as a cost-cutting instrument
causing “HRM without HR managers”.
The analysis highlights two main results:
 Firstly, Organizations with a strong focus on HR cost-cutting do not
outsource more than organization weaker focus on HR cost-cutting.
The analysis show the positive relationship between strong focus on
strategic HRM and level of HR outsourcing\
 Secondly, HR devolution and HR outsourcing are closely related. By,
outsourcing operational HR tasks and delegating people management
to line managers, more time and resources can be released for more
strategic Hr contributions.
According to a study by The Society Of Human Resource Management (SHRM),

over half of all HR professionals have taken advantage of outsourced HR. The top two
reasons for outsourcing are the benefits of cost and time efficiencies. These efficiencies
are really the opportunity costs of business owners and managers, who lose time and
money focusing on HR tasks when these resources can be spent on what must be done to
grow their business. That is, the time and money devoted to employee management is
better spent by outsourcing HR so that businesses can be devoted to core business
functions. So, the above conclusions are important.
5. How could this work be further extended or refined?

The above study aims to examine the HR outsourcing as opportunity as
strategic HR focus or cost cutting. The research was done in good way following
various measures, analysis etc. But, despite of these efforts this study had various
limitations which was inappropriate to give proper conclusions. So, to have a proper
and accurate result this study can be further extended or refined through:
The study only considers the breadth of HR outsourcing phenomenon and
consequently only indicates the presence or absence of external provision in each HR
activity. Depth may be described as the extent to which an organization outsource a
given activity. Having two fundamentals characteristics, depth and breadth can be
conceptualized. So, further research must have both breadth and depth to provide
more complete understanding of HR outsourcing.
The cross-sectional analysis discussed in the study cannot be used to
distinguished “cause” from “effect”. Does organization that outsource HR activities
spend more time on strategic or organization applying a strategic more focus on
HRM outsource? Furthermore, HR outsourcing can evolve over time, so it is
important to use longitudinal data in the future.
The analyses discussed showed that HR department can release more time and
resources for more strategic HR contributions by outsourcing HR tasks and delegating
people management to line managers. If HR department take more on strategic roles,
it arises many issues as how it develops and manages the relationship with external
providers, line managers and so on. To manage the relation, empirical research is
required.
Finally, the further study must focused on impact of HR outsourcing on the
perceptions of several internal customers of the HR functions. It would be worthwhile
to devote more attention to the nature of these relationships in future research.

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Human Resource Management

Human Resource Outsourcing:

6th Feburary, 2018

2. What basic assumptions/arguments does the author make? What facts/opinions

3. What are the significant empirical/conceptual contributions of or gaps in this

According to a study by The Society Of Human Resource Management (SHRM),

5. How could this work be further extended or refined?

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