HR Outsourcing: Threat or Opportunity

Jerome Delmotte and Luc Sels

Faculty of Business and Economics, Research Cente for Organisation Studies,
Katholieke Universitiet Leuven, Belgium
Personal Review,Vol. 37 No.5,2008 pp. 543-563)ISSN:0048-3486

A Literature Review
By: Hud b. Hanapi
Introduction
 In the future to come, the Human Resource (HR) department functions
may be done elsewhere and in different ways and one of the way is
through outsourcing.

 Outsourcing in HR according to Greer(1999) is “the performance, by

outside parties on recurring basis, of HR tasks that would otherwise be
performed in-house.

 Meanwhile, Cook(1999) states that HR outsourcing means “having a

third party service provider or vendor furnish, on an ongoing basis, the
administration of an HR activity that would normally be performed in-
house”.

 The first view sees HR outsourcing as opportunity to focus on strategic

HR involvements and second view sees HR outsourcing as a threat
due to HR cost cutting.
Objective of The Study
The first objective is to examine whether HR
outsourcing is a manifestation of a strategic HR
focus(opportunity) through the first hypotheses :
H1. A strong focus on strategic HR is positively related
to the level of HR outsourcing.

The second objective is to examine whether HR

outsourcing is a manifestation of cost cutting HR
focus(threat) through second hypotheses:
H2. A strong focus on cost cutting in HR is positively
related to level of HR outsourcing.
Literature Review & Methodology
LITERATURE REVIEW
 Venkatsen, Welch and Nayak(1992) said that by outsourcing the non-core activities,
an organization direct more resources (time, money and managerial attention) to its
core activities .
 Adler,(2003) Swister(1997), Maurer and Mobley(1998) said that HR outsourcing can
liberate HR professionals from their more routine and administrative tasks to perform
a more proactive an strategic role

 Greer(1999) and Lever(1997) said that HR outsourcing decisions were found to be a

response to an overwhelming demand for reduced cost in HR services.

 Walker and Weber(1984) said that cost saving can be achieved through increased
benefits from economic of scales of the providers from whom the provisioning of
these outsourcing activities is a core activity.

METHODOLOGY

 The sample for the study is obtained from Panel Survey of Organizations(PASO).
 The data cover 1264 Belgian organizations with ten employees or more.
 Target respondent was HR manager or person responsible for HR(small organization).
 Findings
Descriptive Analyses:
 Organizations where HR is responsible for strategic involvement
outsource more than organizations where this is not the case.
This shows a positive link between strategic HRM focus and
level of outsourcing.
 On cost cutting procedures, result shows that there are more
people in HR department which leads to the lower the level of
outsourcing. This shows a negative link between number of HR
staff and level of outsourcing. Furthermore, firm that expands
its HR department outsource more or less the same as firm that
reduce its HR staffs.
Regression Analyses
 Results provide support for first hypotheses that firm focus on
HR strategic involvement depends more on outsourcing.
 On second hypotheses, a strong focus on HR cost cutting is not
related to a high level of HR outsourcing.
 Conclusion
Conclusion
and Recommendations
 From the finding, researchers conclude that organizations that outsource its
HR tasks focus more on developing its strategic core activities rather than
wanting to cut cost on its HR department functions.

 HR outsourcing helps HR managers to empower their HR functions by

focusing on value added strategic activities and releasing them from many
responsibilities and expectations of HR tasks that need to be meet.

Recommendations
 Future research might consider to focus on the impact of HR outsourcing,
or the impact of HR outsourcing on the perceptions of internal HR function
customers(internal HR customer satisfaction).

 Future research should also include multiple respondents managers other

than HR managers to avoid the possibility of bias from HR managers about
their own functions.