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doi: 10.1111/1748-8583.12031

HR outsourcing: the impact on HR role,

competency development and relationships
Alison J. Glaister, Aston Business School, Aston University
Human Resource Management Journal, Vol 24, no 2, 2014, pages 211–226

The business benefits of an outsourcing strategy are well documented, and HR is encouraged to outsource
in order to add value. Yet little is known about how HR outsourcing affects the HR role, competencies
and relationships with senior management. These issues are examined through 27 semi-structured
interviews with senior HR professionals, comparing HR departments engaged in HR outsourcing with
those maintaining full in-house HR provision. The findings indicate that HR outsourcing stymies HR
role transformation. HR outsourcers experienced limited skill development and an increased focus on cost
reduction at the expense of their strategic position. In contrast, non-HR outsourcers actively engaged in
other parts of the business, developing competencies that garnered trust and support of senior managers.
The benefits of an external HR community appear limited. The study suggests that an ‘internal’ HR
community is better placed to enhance HR departmental roles.
Contact: Dr Alison J. Glaister, Aston Business School, Aston University, Work and
Organisational Psychology Group, Birmingham, West Midlands B4 7ET, UK. Email:
a.glaister@aston.ac.uk

INTRODUCTION

H
uman resource outsourcing (HRO), placing HR activities outside an ‘organisation’s
boundaries’ (Macbeth, 2008: 38), is the fastest growing segment of business process
outsourcing (Brown and Hale, 2007), valued at $3.1 billion in 2010 (Ferguson, 2010). Its
attractiveness lies in the promise of operating efficiencies, the import of specialist expertise,
greater process control and risk reduction, and more specific to HR, a key strategic enabler
(Stroh and Treehuboff, 2003; McIvor, 2005; Mol, 2007) facilitating a shift away from an inward
HR administration focus towards an outward business focus (Martin et al., 2008). The
momentum for HRO has been increased further by the financial crisis, creating radical change
in the parameters within which the human resource function (henceforth HR) operates,
representing a ‘cultural crisis of ideas, assumptions and values’ (Zagelmeyer and Gollan, 2012:
3287). Pressure is therefore placed on HR to adjust its policies and ways of working.
Through 27 qualitative interviews with senior HR personnel, this article examines how HRO
impacts on HR’s role, competencies and senior management team (SMT) relationships, and
compares each of these to their non-outsourcing counterparts. A key contribution is made to the
understanding of the impacts of HRO on the HR function as it struggles to cope with the
repercussions of the financial crisis. The study also contributes to the theoretical underpinnings
of HRO logic and examines the tensions inherent within institutional theory (IT), proposing the
integration of structuration theory in order to understand better HRO motivation. This is the
first study to combine IT and structuration theory to explain and compare the institutionally
accepted response of HRO to an alternative position of non-outsourcing, evaluating whether or
not HRO produces superior outcomes. The study is timely given the growing concerns over the
ease with which organisations are embracing a contracting-out culture and experiencing its
negative repercussions. It provides preliminary evidence of a need for an alternative approach.

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Please cite this article in press as: Glaister, A.J. (2014) ‘HR outsourcing: the impact on HR role, competency development and relationships’. Human
Resource Management Journal 24: 2, 211–226.
The HR function and human resource outsourcing

The article is set out as follows. The next section discusses the theoretical underpinnings of
HRO, sets out the benefits of an HRO strategy and discusses the extent to which HR
transformative measures have been successful. A series of research questions is introduced
through a discussion of HR role change, competencies and SMT relationships. The research
methods are then introduced, and the findings are presented. The discussion and conclusion is
followed by the limitations of the study and recommendations for further research.

HRO AND UNDERPINNING THEORIES

A variety of theories underpin the use of HRO in organisations, including transaction cost
economics (TCE), the resource-based view (RBV), micro economics, industrial organisation,
agency theory, real options theory and IT (Mol, 2007: 36). Studies of HRO tend to rely on the
first two of these approaches. Williamson’s (1975) TCE suggests that firms use the most efficient
form of organisation that reduces production and transaction costs. Production costs are
reduced through the allocative efficiency of the market, but there are transaction costs
associated with selection, negotiation and contract maintenance. However, little analysis is
conducted on the availability of strategic options and their consequences (Macbeth, 2008), and
economising motives only limits the discourse of the outsourcing decision (Holcomb and Hitt,
2007). Also, the efficient use of resources confers little status to HR, as HR professionals are
limited by their personal characteristics and their own HR processes (Lawler and Boudreau,
2009). Knowledge acquisition and development are missing elements of the TCE framework,
and firms may be willing to endure high transaction costs of market trading if deemed
advantageous (Madhok, 1996; Jacobides and Winter, 2005).
The RBV emphasises the internal resources of the firm and explains the organisational need
for balance between exploiting existing resources and acquiring and developing new resources
(Wernerfelt, 1984). According to Greer et al. (1999), HRO can be nested within a bigger change
initiative contributing to the creation of resources that are valuable, rare, inimitable and
non-substitutable (Barney, 1991), but the literature does not explain how this value can be
extracted through HRO engagement. Further, the identification of core and peripheral HR
activities is problematic, and a need remains to consider the interface between different HR
processes (Kotabe, 1992; Lilly et al., 2005).
Some attempt has been made to synthesise RBV and TCE, merging governance issues with the
transaction costs involved in creating, protecting and developing organisational resources and
know-how (Leiblein, 2003; Foss and Foss, 2004). While these theories assume that HRO is a
considered intervention with a clear and articulated rationale, in practice this is often not the case
(Macbeth, 2008). It is also necessary to consider the social alongside the economic influences that
guide behaviour (Granovetter, 1985; Scarborough, 1995). IT is particularly pertinent as it
considers the broader context of HRO as well as the pressures (political, situational and historical)
exerted through the continued professionalisation of HR departments.
IT explains HRO engagement through three ‘isomorphic’ pressures: coercive pressure – the
threat of sanction from resource providers; mimetic pressure – described by Klass (2008) as
‘contagion processes’ often resulting in a ‘shared definition of social reality’ (Scott, 1987: 496),
leading to inappropriate solutions; and normative pressure – adherence to professional
standards set down by professional bodies, such as the Chartered Institute of Personnel and
Development (CIPD). In unpredictable environments, such as the financial crisis, organisations
are more likely to copy the initiatives of similar organisations (Muñoz-Bullón and
Sánchez-Bueno, 2013). Thus, organisations seek legitimacy through conformance to their
institutional settings.

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Assuming that HRO is a symbolic response to the external environment, there is a need
to examine how HR reconciles outsourcing with its own concerns and the extent to which
HR become active agents. Structuration theory (Giddens, 1984) integrates agency into the
wider social structure and helps explain ‘observable action and the deeper structures that
guide action’ (Heracleous and Hendry, 2000: 1260). Kroon and Paauwe (2013) suggest that
organisations respond to external exigencies in different ways, and some managers will
justify their practices by cutting cost, while others will use a more reflexive and responsible
response – thus, much depends upon how individual actors make sense of their
environment.
IT is ‘helpful in explaining why HR practices are what they are’ (Paauwe and Boselie, 2003:
61) and assumes that there is an overarching embrace of HRO, that there will be some
convergence in the subsequent role and competencies of HR professionals, and that this
demonstrates a core set of values consistent with those of the SMT. Extending IT logic and
incorporating structuration theory, we would expect to see differences in the roles, competency
development and SMT relationships between those pursuing and those not pursuing an HRO
strategy. Each of these is discussed in turn.

HR role change
HR experiences normative pressure to use Ulrich’s (1997) HR business partner model (HRBP),
in which HR’s role is focused on four key areas – administration, employees, strategy and
change. HRO offers the chance to devolve the administrative and employee focus, and
concentrate on strategy and change. Research suggests that HRO is positively associated with
a strategic HR department (Delmotte and Sels, 2008; Tremblay et al., 2008), as complex
contracting environments require this level of HR intervention (Raja et al., 2013) and enable HR
to develop strategic competencies (Rucci, 1997; Sheehan, 2009), and legitimise continued
presence. Indeed, the continued outsourcing of transactional processes internationally (Alewell
et al., 2009; Sheehan, 2009; Chiang et al., 2010) implies the ‘reinterpretation of existing events
and new forms of action consistent with new institutional expectations’ (Rogers et al., 2007:
569). HRO promises an integration among processes, systems and business outcomes (Caldwell
and Storey, 2007). The outsourcing network creates upskilling opportunities for HR
departments, creating new specialist roles and the development of contract management and
‘relational co-ordination’ skills (Rubery et al., 2010: 19). When combined with other HR
transformation measures, such as shared service centres and E-HR, HR departments possess
powerful tools that are able to respond to changing organisational needs (Farndale et al., 2009;
Boglind et al., 2011) while developing the quality of human capital within the organisation and
providing greater opportunity for strategic HR involvement (Boglind et al., 2011; Meijerink and
Bondarouk, 2013).
Nevertheless, HR tends to remain confined to traditional administrative roles (Boglind
et al., 2011; Marler and Fisher, 2013; Meijerink and Bondarouk, 2013) and excluded from
decision making (Björkman and Soderberg, 2006; Parry and Tyson, 2007). Overall, HR’s
strategic involvement is weak (Parry and Tyson, 2011: 348), limiting the benefits of the HR
community (Ulrich, 1997) and casting doubt on the advantages of an HRO strategy. The
formal structures created through HRO may appear consistent with social practice and with
rational economic outcomes, but ‘its adoption fulfils symbolic rather than task-related
requirements’ (Tolbert and Zucker, 1983: 26). Institutionalised practices appear homogeneous,
but their implementation and effects may differ (Rogers et al., 2007). This leads to the first
research question: What is the nature of the role change experienced by HR outsourcers and
non-HR outsourcers?

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HR competencies
Today’s competency requirements of HR personnel are considerably different from those
traditionally associated with HR. Lawler et al. (2004) suggest the need for HR to develop vendor
management skills, technology, law, and finance skills, and where possible these should be
developed internally. They suggest that HR will require fewer administration skills but will rely
more heavily on centres of expertise and senior HR strategic analysts and system designers.
Ulrich et al. (2013) identify a series of behavioural HR competencies (linked to a further set of
new roles), including self-awareness and high impact communication skills (credible activist
role), building culture, efficiency, quality and innovation (capability builder role), initiate and
sustain change (change champion role), interpret business context and co-produce strategy
(strategic positioner role), engage in talent management and organisation design (innovator and
integrator role), and use and administer technology (technology proponent role). However,
according to practitioner reports, HR continues to struggle to build strategic management
competencies in areas such as cost and data analysis, project and change management, financial
skills, and cross-functional expertise (Mercer, 2007).
Increasingly, HR professionals are concerned by the growing skills gaps within the
profession and the continued problem of limited business understanding (CIPD, 2012). They
focus their development activities on inward-facing personal competencies rather than the
‘new-HR competencies’ of leadership and internal consulting (Douglas-Johnson and King,
2002); indeed, Hesketh (2008) suggests that HRO activity is premised on the inability of HR
departments to improve their own processes internally.
According to Pritchard (2009), HR’s lack of focus on new-HR competencies is the result of
the continued sense of role schizophrenia and the functional disconnects initially created by the
HRBP model. Raja et al. (2013: 324) suggest that the HRBP model undermines the cohesiveness
of the HR function, and subsequent revisions of this only exacerbate the sense of role conflict
and reinforces a silo mentality within the HR department (Ulrich et al., 2008). These role
permutations and unrealistic expectations (Boudreau and Ziskin, 2011: 255) are symptomatic of
the need for a profession to respond to broader institutional requirements, and the tension
between top-down interpretation of institutional pressures and bottom-up processing of
institutional demands (Greenwood et al., 2002) causing confusion between the rhetoric and the
reality of the HR role and how it should respond to these new aspirations. HR departments
choose to focus on ‘operational excellence’ (Ulrich et al., 2009: 26) at the expense of strategic
external concerns (Becker et al., 2001; Ulrich et al., 2009). HRO provides the former through the
immediacy of prescribed outcomes, yet a response to these pressures requires a new set of HR
competencies, leading to the second research question: What competencies are being developed
among HR outsourcers, and how do these compare to non-HR outsourcers?

SMT relationships
The role of HR is defined by SMT expectations (Wilcox, 2007; Lemmergaard, 2009). IT suggests
that SMT may exert coercive pressures on HR in accordance with the historic perceptions of
‘HR people’ and the role they are expected to play in organisations. Sheehan and De Cieri
(2012) suggest that a lack of business focus is the result of the belief among new entrants that
HR should be a ‘caring’ (read ‘internally focused’) profession, initiating a cycle that restricts
any progress towards change, which reinforces a ‘soft’ reputation and feeds back into HR
professional behaviour (Kulik and Perry, 2008). SMT expectations are shaped by this behaviour,
and they fail to understand the need for a strategic HR department (Beer, 1997), often resulting
in efficiency-seeking behaviour that remains disconnected from strategic HR activity (Lawler

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and Boudreau, 2009). As a consequence, HRO is considered an alternative to HR

transformation, and strategic change fails to transpire (Wahrenburg et al., 2006). ‘Senior
management patronage’ (Wright, 2008: 1074) is, therefore, an important enabler in the
HRO/strategy link. This highlights the following research question: Are there any discernible
differences in the perception of the quality of senior management relationships between HR
outsourcers and non-HR outsourcers?

RESEARCH METHODS

In order to examine the research questions, data were obtained through qualitative telephone
interviews with 27 senior HR professionals who had participated in a CIPD-endorsed survey
and agreed to be interviewed further. Of the 27 participants, 66 per cent were employed in
private services, 19 per cent in manufacturing and production, and 14 per cent in public
services. The sample is representative of the broader grouping of HR professionals in the CIPD
and provides insight from a mix of sectors and sizes of organisations. The characteristics of the
sample are shown in Table 1. Francis and Keegan (2006) suggest that CIPD membership shapes
attitudes towards practice and perpetuates normative discourse. However, the dichotomy
between outsourcing and not-outsourcing suggests that despite normative ideals, there is room
for variation within the HR function.
The initial survey was piloted and distributed through the CIPD. Subsequently, this study’s
interview questions were derived from the survey and were designed to amplify and explain
survey responses. These interview questions were initially piloted through the local CIPD
branch. Participants were asked a range of standardised questions through a semi-structured
format on the nature of their role in the organisation, the level of resourcing within HR, the
characteristics of HRO and motivations for the decision to externalise or internalise. Other
questions focused on the development of skills and how these have changed over time, how
these skills impact problem solving, and the extent to which other professional groups
compensate for HR expertise. Participants were asked how they were perceived and whether
their choice of HR delivery had impacted SMT relationships. These questions were designed to
gain an understanding of the process and structures that have created a particular worldview,
and are therefore deductive – working from the theory that HRO leads to a more strategic HR
function – but also inductive in order to understand why this might/might not occur.
Prior to each interview, participants were presented with an overview of the study, given
details of how the findings were going to be used and assured of their anonymity. Participants
were made aware of their freedom to opt out of the research process at any stage. The telephone
interviews lasted between 60 and 90 minutes each, and were recorded with participant
permission and then transcribed later. The interviews were based on HR managerial
perceptions and their own HR practice in order to gain some insight into the lived experience
of HR managers working in both an externalised and internalised provision. This approach has
been used by Caldwell (2002) and Budhwar (2000), who mapped perceptions of HR specialists
as they are experts within their field.
Consistent with Miles and Huberman (1994), a systematic analysis was used – and each
interview was transcribed and annotated with reflective reminders and interpretive indices.
Codes were then devised, and emergent patterns and specific themes were identified across the
data (see Table 2). In order to focus the analysis, these more indigenous codes were then
assigned into the broader a priori categories of role change, competencies and senior manager
relationships. The next section discusses each of these in turn.

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 TABLE 1 Participant characteristics

216
HR outsourcers

Interviewee Position Company type Sector Employees Activities Also engaged

outsourced in generic BPO

O1 Head of HR Professional services Private <250 5 Yes

O2 HR manager Retail/wholesale Private <250 2 Yes
O3 HR expert Professional services Private <250 3 Yes
O4 HR expert Professional services Private <250 10 No
O5 Head of HR IT services Private <250 3 No
O6 HR manager Professional services Private <250 6 Yes
O7 Head of HR Electricity/gas water Private <250/overseeing 13,000+ 8 No
O8 HR manager Hotel/catering/leisure Private 501–1,000 4 Yes
O9 HR manager Professional services Private 1,001–5,000 6 Yes
O10 Head of HR Finance/insurance Private 1,001–5,000 10 Yes
O11 HR expert Professional services Private 5,001–10,000 4 Yes
The HR function and human resource outsourcing

O12 Head of HR Police Public 10,001+ 4 Yes

O13 Shared services manager Professional services Private 10,001+ 4 Yes
O14 Head of HR Hotel/catering/leisure Private 10,001+ 6 Yes

Non-HR outsourcers

Interviewee Position Company type Sector Employees Also engaged

in generic BPO

N1 Head of HR Manufacturing Private <250 Yes

N2 Head of HR Manufacturing Private 250–500 Yes
N3 Learning and development manager Media Private 5,001–10,000 Yes
N4 HR manager Health Public 10,001+ Yes
N5 Head of HR Government Public 250–500 Yes
N6 HR manager Hotel/catering/leisure Private <250 Yes
N7 HR manager Transport/distribution/ storage Private 1,001–5,000 Yes
N8 Head of HR Police Public 1,001–5,000 Yes
N9 Head of HR Engineering Private 501–1,000 Yes
N10 Head of HR Media Private 501–1,000 Yes
N11 Head of HR Retail/wholesale Private 501–1,000 No
N12 HR manager Manufacturing Private 501–1,000 Yes
N13 HR manager Hotel/catering/leisure Voluntary 250–500 Yes

BPO, business process outsourcing.

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TABLE 2 Broad themes and corresponding emergent nodes

Broad theme Emergent node

Role change HR worries

HR competencies
Senior management relationships
Role of HR
Trust (do stakeholders trust HR?)
HR performance
Personality (behavioural change in HR)
Changes in HR (organisation position and HR practice)
Experience and skills
Professional invasion (reliance on other groups in the business)
Vendor issues
Vendor performance management
Position of HR function
Responsibility for HR
Culture

FINDINGS

Role change
Participants were asked how their role had changed. HR outsourcers gave mixed responses; on
the one hand, HR believed that its roles were becoming more strategic: “I can look at what the
business is doing, and look at how they are resourced and what their long term projections are,
but I don’t have to worry about Joe Bloggs and his grievance or anything like that, that’s all
happening at a distance” (O7). This suggests that the strategic role is a superior role within the
organisation and that it can be considered an alternative to HR’s transactional focus. In some
cases, HR was removed from management team development exercises to create more
self-contained units in the business that were less dependent on HR and created more strategic
space.
Rather than crafting an HR role based on their own perceptions of HR excellence, HR roles
were shaped by the expectations of senior managers:
“It’s our job to think about the cultural implications of things . . . but it cannot be
the primary driver, that has got to be whatever the strategic objective of the
organisation is in its current existence” (O14).
Among outsourcers, credibility depends less on an understanding of cultural impacts of
HRO, as these might counter SMT requirements, and more on flexing the HR offering to match
managerial expectations and broader strategy. In one instance, this ability to be flexible to the
demands of the business leads to the gradual disintegration of the HR team, building up the
HR role to reflect the HRBP model in order to operationalise a series of changes, and then
gradually deconstructing it to devolve all responsibility to the senior and line managers:
“. . . first of all there was the change that meant the training team was devolved,
then there was the change to people’s terms and conditions, then there was the
change that brought in this really rather great performance management and
objective setting system, then there was the change that lead to managers being
coached in order to better manage their teams and then came the end of the need
for a strategic HR worker” (O10).

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Yet, despite the diminution of the HR role, the respondent applauded the decision to
outsource HR and was impressed by the capabilities of the outsource provider. Thus, even
within an outsourced context, HR struggled for legitimacy and participants stressed the need
for impression management tactics – “to be seen to be doing and to get the exposure and the
experience” (O7). This led to the design of HR ‘PR’ exercises aimed at senior managers and
monthly meetings of the HR team offering suggestions of what the HR team should look like.
As HR sought to increase credibility through business alignment, there appeared a shift away
from soft HRM approaches to harder approaches: “I didn’t enter into HR to make
friends . . . My MD turned around and said ‘you know . . . you are going to be the most hated
person in the company’ ” (O5). The impression is of a greater shift towards change agent roles
with a potential disregard for softer HR advocate roles. This was confirmed elsewhere: “we
have no idea what the staff think. None of it comes through the meetings . . . so now we get
an alert when someone reaches the end of their probationary period” (O8). Thus, even though
an employee focus might exist, it appears to be an arm’s-length consideration.
These contrast with non-outsourcing participants who sought to maintain either a strong
employee champion focus or at least one balanced against their strategic role:
“you can be caring without being fluffy and I think it’s important to be structured,
it is like super nanny, give them structures, routines and boundaries and that is
more caring” (N11).
“I think it is less of the admin expert and more of the employee champion/advocate
whichever word you want to use. I do think it is being able to have the foot in each
camp, the balance of view. Sometimes things are best for the organisations, that are
not best for an employee” (N10).
For these participants, the people role remained a key strength of HR and they sought to
engage staff in the business. These HR managers felt it was important to act on employee
surveys and to physically walk around the organisation. HRO represented a clinical model, and
a threat to people, cultural values and high-touch HRM. These participants emphasised their
advisory role and their focus on coaching and developing internal expertise. Yet emphasis was
also placed on balancing the needs of employees against those of senior managers and using
the role of “conscience for the business” where “integrity in HR is crucial . . .” (N9).
Participants also highlighted their role in balancing the tension between quality and
efficiency that had been aggravated during the recession. This, in many cases, had led to both
an operational and strategic focus together with more control within HR as a whole:
“I have business partners who work with business, but they actually need to be
brought into the bosom of the rest of HR to understand what is going on across the
whole HR remit, so they can make the right decisions . . . provide the right context
and right information . . . Otherwise the communication becomes very weak, the
service become linear, you get the tensions between the HR people that are working
on the front-line and the people that are trying to produce corporate solutions that
are cost effective that meet overall businesses [needs]” (N8).
This comment highlights the multiple roles played by HR and the conscious need to stymie
the balkanisation effects that these can create. It recognises the need for a departmental focus
that is able to strengthen partnership working and challenge business decisions.
While each of these HR managers was aware of their people impacts, these fell into two
categories: (a) those who, at an operational, tactical and strategic level, sought to consider their
range of internal and external stakeholders, and (b) those who were focused solely on the

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internal organisation and the needs of their own people. The former tended to be located in
manufacturing, and emphasised their positive role with employees, the local community and
trade unions. In part, this was a response to a variety of regulatory bodies and concerns over
the environmental impact of their business. The latter relied less on environmental scanning
and external stakeholder management, and more on internal talent management and reducing
reliance on the external environment for HR needs. Both sought to protect the organisation
during the recession, albeit in different ways.
The development of HR competencies
The second question examines the competencies developed within the two groups. HR
outsourcers were renewing their outsourcing contracts, and this responsibility shifted from the
finance department to the HR department. The emphasis on skill development was placed on
financial awareness and negotiation:
“I need to have a broader understanding of the business and the costs . . . so I’ve
met with the senior finance manager and talked through how they do their costs”
(O6).

“I very quickly take cost out where it is not needed . . . I cannot be seen as a
non-participant when an organisation’s success is at stake . . . whether it’s in your
ethical subset or not, you absolutely have to participate in that” (O14).
Skill development focused on business imperatives, yet despite this, these skills were
developed informally with HR managers relying on internal colleagues for guidance and advice.
For some, the ease with which this was undertaken depended upon their own tenure, and the
better they understood the organisation the more comfortable they felt. However, O14’s comment
reflects the urgency of being seen to cut costs while having to disregard personal standards.
Rather than seeking to foster strategic skills, outsourcers saw themselves as generalists with
the ability to buy in new knowledge as and when expected:
“It is very hard in this job. You can be a generalist and be good at most things, but
when it comes down to the real detail you do need those experts on hand” (O7).
HRO provides a disincentive to developing new skills as these can be purchased or sourced
internally through a reliance on finance and procurement departments. HR outsourcers view
this inclusiveness as creating the potential for greater success.
Overall, new skill development appeared limited among outsourcers, but they did
emphasise greater behavioural change relating to the need for “HR PR”, including the need to
become more “forceful and assertive” (O6), “confrontational . . . if demanded” (O10),
“extrovert” (O7), able to “capitalise on new opportunities” (O14) and able to “explain jargon”
(O4). Thus, despite outsourcing HR provision and claiming growth in HR’s strategic role, these
HR professionals continued to struggle to create an assertive image.
Non-outsourcing participants also sought behavioural change, but these were combined
with a diverse range of skills aimed at creating a new HR identity. Behavioural change focused
on being able to navigate the political terrain of the organisation, and to understand when and
how to contribute and solve problems. Consistent with the employee champion focus, some
concentrated on “trying to get a better understanding of people’s needs” (N2), requiring a
consultative focus, while others stressed the need to adapt:
“You have to be able to wear the right hats at the right time. I think the only thing
that has changed with me in the last five years is I’ve just been able to wear the
right hat before I’ve got in the room” (N9).

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“You have to understand your CEO and your board . . . you gain more credibility
by not being too aggressive because if you are, they think you are trying to push
you own agenda” (N13).
Non-outsourcers appeared to conform to expectation, but there appears a subtext of skilful
manipulation of stakeholders and a challenge to traditional ways of doing things. This is, in
part, premised on the establishment of a clear identity and philosophy that assists the
management of organisational expectations. These approaches developed a managerial trust in
HR, which paved the way for more strategic involvement and the development of new skills.
N8 stated:
“I think the emerging skills that are coming through are analytical skills, the ability
to not just read data and interpret the data and draw conclusions from the data, it
is about knowing what to ask in the first place and what data to collect, stakeholder
management, consultancy skills, business partnering skills and risk assessment
skills”.
Non-outsourcers believed that basic HR skills could be taught, but HR professionals needed
to develop different attitudes towards the business, to solve problems, to engage in stakeholder
management and to ‘sign up’ the organisation to the HR agenda. They emphasised the need
to engage in other business activities, such as fleet management, sales and organisation-wide
cost-saving initiatives, in order to galvanise HR’s position:
“I have strategic responsibility for sales I am spending every single month at
two-day sales meeting with our top teams . . . Of course, I am not doing this
completely altruistically. I know full well when the success comes back it will not
only be the sales function standing up and saying ‘we saved the world’, we will be
standing beside them. It’s a good place for us to be” (N9).
Non-outsourcers sought to re-evaluate critically the role of HR within the business, and
chose to manipulate the organisational perceptions of HR through careful politicking and
working across the organisation. There was a concerted effort to develop new skills and bring
a unique perspective to different parts of the business.
SMT relationships
Participants were asked to consider their relationship with the SMT and to reflect on any
changes that occurred alongside HR’s shift in emphasis. HRO is assumed to demonstrate HR’s
added value, and some participants reflected this positive change: “I think we are being taken
more seriously. For me, outsourcing is about credibility and I think the senior team is now
seeing that we have something to offer” (O13). HR outsourcers believed that they were
becoming more credible through outsourcing, and that in places the ability to cut cost sent an
important message to the business of a tangible HR contribution. “We’re seen to be cutting costs
and people are happy with that” (O4). The engagement in HRO inspired trust among the SMT:
“I think there is a respect, particularly from the senior team. And there is a lot of freedom for
us to look at initiatives” (O6).
Even though many HR outsourcers reported good relationships with their chief executive
officers (CEOs), these relationships did not offer outsourcers the leeway to develop their role
as they wished: “. . . my CEO will say ‘just stick to the knitting’ and you say ‘I don’t want to
stick to the knitting, I want to do the other stuff and we struggle in HR, because we are seen
as the policemen . . . generally we have to work quite hard at the PR” (O7). Thus, it appeared
that despite the symbolic gesture of HRO, HR professionals remained confined by the SMT
definitions and expectations of HR, conferring little status overall.

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Despite HR professionals understanding their own contribution and working towards

defined outcomes, HR acknowledged an ongoing critique of themselves: “I would say we may
well be viewed as not easy to get hold of, that data and MI is not necessarily generated to the
standard that you would expect. I don’t think we are seen to participate in planning as well
as we could do” (O14). This critique is indicative of a greater struggle between HR’s focus in
the long term and the need to establish a common vision and the immediacy of outcomes
specified by SMT:
“The MD says we need to save money, become more efficient and sometimes does
not look at the strategic issues . . . so you know, there is always going to be conflict
between the MD and the Board and HR” (O3).

“The executives were fairly remote from me to access. And I guess I never really
bridged the gap between the way that they saw the HR function and the way that
I saw it” (JO10).

Non-outsourcers acknowledged the difficulty in bridging the gap between diverse

perceptions of HR’s raison d’être but appeared adept at doing so. They understood the need to
justify their existence and placed an importance on gaining credibility through subtly managing
SMT perception: “[Y]ou have to understand your CEO and your board – you gain more
credibility by not being too aggressive . . . it’s very difficult but on the more tricky CEOs that’s
worked really well” (N13). Some of these HR managers examined their HR predecessors in
order to discover where they went wrong and how to improve HR’s position: “The HR
managers they’ve had [previously] could never survive. They tried to put in policies that were
contrary to the MD’s wishes” (N1). It was, therefore, important for HR to develop the political
know-how, to be able to ‘play the game’ through listening and responding appropriately,
innovating and taking the lead:
“I was the first director that went ‘we lead by example’ and looked at my
department first . . . then they can’t turn around and say ‘HR has gotten away with
it’, so I try and make sure that we are the forefront of any change. It is easier to sell
stuff then” (N11).

Respect was fostered by demonstrating a broader interest and working in other areas of the
business. However, non-outsourcers also believed in the maintenance of a suitable mindset
within the SMT, and the role of CEOs who had experienced failure and the requirement for an
enlightened HR philosophy.

DISCUSSION AND CONCLUSION

The study adds value to our understanding of the impacts of HRO within the context of the
financial crisis and to the theoretical underpinnings supporting HRO logic. It is the first to
evaluate the HR outcomes of both an HRO strategy and an internal strategy, and to combine
institutional and structuration theory. Through the use of qualitative interviews, three key areas
were examined: role change, competency development and perceptions of SMT relationships.
An HRO strategy provides a response to economic turbulence as it is a predominantly
efficiency-seeking initiative during which the challenges for HR are amplified as employers
seek ‘hyperflexible’ structures (Thompson et al., 2013: 141). Indeed, Thompson et al. (2013)
suggest that during times of crisis the challenge for HR is focused on their change agent and
employee champion roles. Therefore, the potential for role conflict within the HR function is
amplified at this time, as it needs to use a strategic perspective while focusing on employees,

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change and administration. There was no evidence of role conflict among outsourcers as they
de-emphasised their employee champion role, “we have no idea what the staff think” (O5),
distancing themselves from transactional work and team development exercises. HRO
represented an end in itself, and in places HR was responsible for its own obsolescence.
The SMT expectations of HR focus on their personnel role (Kulik and Perry, 2008), and these
expectations are shaped by their own professional norms. However, once most of the people
focus is removed, the norms under which SMT operates shift to the immediacy of the task at
hand – the management of outsourcing – and not towards the integration of HR at a strategic
level. Contrary to the findings of Raja et al. (2013), outsourcers were encouraged to “stick to the
knitting” (O7) and generate more metrics (O14) to demonstrate efficiencies, thus revealing the
tensions between top-down pressures and bottom-up interpretation of HRO (Greenwood et al.,
2002). This helps explain the focus on “HR-PR” (O7) exercises, the difficulties that respondents
experienced in crafting new identities, and the informality with which they narrowly focused
their development on negotiation and finance skills (Rubery et al., 2010) rather than strategic
capabilities.
Non-outsourcers experienced the same drive for efficiency and adhered to their own
professional norms through their interpretation of the HRBP role. Rather than fragmentary,
their roles were integrated; they emphasised “having a foot in each camp” (N11) and the need
for business partners to be “brought into the bosom of the rest of HR” (N8). Roles among
non-outsourcers coalesced into a broader role, subsumed under the heading of employee
champion. As such, skill development and the range of new behavioural competencies were
also driven by the imperative for functional survival and trying to understand the needs of
stakeholders (N2). Skill development extended beyond the HR boundary through an explicit
understanding of the need to “wear the right hats at the right time” (N9), and therefore
expands HR’s business remit, consistent with the behavioural competencies identified by Ulrich
et al. (2013). It was not so much the illusion of becoming strategic that brought credibility to the
role but a more enhanced contribution to the business, a focus on “conscience” and “integrity”
(N9), the multitasking across internal boundaries, and the development of a unique business
perspective (Schuler, 1990).
Non-outsourcers cultivated prestige and used symbolic action to create positive perception
(Galang and Ferris, 1997). These centred on managing the impression of value-added: “we
saved the world” (N9); understanding the prime motivations of the business and what it
values: “you have to understand your CEO and your Board” (N13); and managing information
from the external environment. Such symbolic action increased social capital and its relational
dimensions of ‘trust, obligation and expectations, and a sense of shared identity and
identification’ (Starkey and Tempest, 2004: 79), and consistent with Teague and Roche (2013) led
to a more established role that focused on motivation and continuity.
Nijssen and Paauwe (2012: 3327) warn that institutional contexts operating in dynamic
environments can lead to ‘counterproductive organisational practice’, and HRO provides an
example of such counterproductivity. Non-outsourcers were more resourceful during the
financial crisis, but outsourcers remained constrained despite their HRO endeavours. IT not
only helps explain the similarity of outcomes among outsourcers, but also highlights tensions
between the isomorphic pressures: the coercive effect of efficiency seeking through mimicry
appears at odds with the normative ideals of quality and employee centredness and HR’s quest
for strategic involvement. HRO might foster credibility, but this can only be for the short term.
IT is useful in examining the impacts of external crises on managerial perception and the
normative business ideals, but it is less useful in helping understand the role of individual
actors in shaping alternative responses to external pressures – the transformation taking place

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in internalised HR teams. These teams not only create professional space and manage
impressions to appear consistent with professional norms, but also shape and redefine them.
Structuration theory addresses these weaknesses, and when combined with IT provides a more
dynamic perspective of HRO and how HR professionals understand their context and shape
their responses to environmental turbulence (Kroon and Paauwe, 2013).
This study has several implications for practitioners: First, if pressure exists to pursue an
HRO strategy, a strong HR presence is required, and care must be taken to ensure that HR
continues to play the role of business conscience and does not jettison the employee champion
role in favour of an enhanced strategic role. Second, prior to outsourcing, HR must articulate
a clear vision of what it wants to achieve and to ensure it avoids role fragmentation that may
further damage HR reputation. Third, rather than embracing an HRO strategy, managers might
focus their efforts on developing a strong internal HR team with high visibility and interaction
across the organisation. This ensures cultural consistency of change initiatives and balances
management and employee interests with quality and efficiency, and creates more innovative
ways in which HR is able to demonstrate its business contribution.

LIMITATIONS AND SUGGESTIONS FOR FUTURE RESEARCH

Limitations of the study should be acknowledged. The study relied on a sample of HR

managers, and while they can comment on their role and competencies, it is harder for them
to comment on how they might be perceived by SMT. Indeed, future studies should consider
multiple stakeholder views and triangulate data across a range of research methods. While the
study revealed interesting insights into the differences between HR outsourcers and non-HR
outsourcers, findings should be treated with caution as the small sample size precludes
generalisability. The limitations associated with a cross-sectional study are also recognised, and
it would be useful for future research to develop a longitudinal approach that traces HR’s
development and changing relationships within the organisation. Notwithstanding these
limitations, the study adds richness to an understanding of the complexities of HRO and its
impacts on the HR function.

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