Research Question

• Human Resource Outsourcing: How does it lead to an effective

utilisation of resources and maximises output for an organisation?

Or

• Why is Human Resource Outsourcing being considered as

effective option for various organisations as means to achieve
effective utilisation of resources?
 Introduction

According to Maurice F. Greaver ‘‘Outsourcing is the act of

transferring some of an organisation’s recurring internal
activities and decision rights to outside providers’’ Inspite of the
global economic slowdown Business Process Outsourcing(BPO) is
continuing to become one of the most sought after trends in the
global business. There are various reasons why many
organisations resort to outsourcing as means to achieve effective
utilisation of its resources. Some could be organizationally driven
reasons like to achieve increased product and service value,
customer satisfaction, to enhance effectiveness by focussing on
what you can do best. Some other reasons could be improvement
driven, financially driven, revenue and cost driven which includes
to improve management control, obtain expertise skills and
technologies which would not be otherwise available., gain
market access and increase business opportunities through
provider’s network and increase commitment and energy in non
core business areas.

One of the various functions within an organisation which is

increasingly being outsourced is the function of Human Resource.

The role Human resource in an organisation mostly involves

recruiting employees, administration of their benefits, payroll
and company policies. Generally these functions are not
considered to be the core functions of an organisation. HR
outsourcing helps the organisations free their internal resources
so that they list out their priorities strategically and optimize
investments in human capital. It depends on organisation to
organisation which process within the HR they would like to
outsource. Some choose specific components like training,
payroll or recruiting and some use a combination of outsourcing
and in-sourcing in order to achieve competitive advantage.
Literature Review

Considering the significance of HR and outsourcing there are lots

of literature available on them. In terms of outsourcing most
popular belief among people is that it has negative effects on the
countries economy and its employment sector. In an interview
with Dilip R. Vellodi, chairman and executive officer of
Sutherland Global services, one of the leading BPO companies
said that the global BPO market is roughly around $175 billion of
which 65% is in North America. He also feels that with the
economic slowdown in 2009 the BPO market which was earlier
growing at a steady rate shrunk a little bit. But this shrinkage in
growth was not because of lack of demand but because the
decisions were either not made or were postponed. Also
according to him during a downturn in an economy, companies
tend to focus more on their core competencies which drive their
efficiency and productivity and less on activities which do not
come under its core competencies, HR function being of them.
He also feels that Outsourcing will help the global economy as it
will force the companies to become more efficient in its
operations, especially in a downturn
http://business.rediff.com/interview/2010/may/17/interview-with-dilip-r-
vellodi-chairman-sutherland-global-services.htm.

Dr Frost’s research indicates that there are various barriers to

outsourcing which includes cultural barriers, human resource
barriers, monitoring and control issues, confidentiality and lack
of experience. One of the human resource issues outsourcing can
create is concerns of a possible knock on effect of redundancy on
motivation and loyalty within the company (Kippenberger.
(1997). Outsourcing: How close to the core can you go. The
Antidote. 2 (6), 20-21.)

In a research done by Jean Woodall of Oxford Brookes University

and others have explored how 12 of the large and small
organisations come to a decision to outsource human resources.
This research focuses upon the perceptions and experiences of
senior HR managers but excludes perceptions and experiences of
all staff employed in the HR function.
(Jean Woodall, William Scott-Jackson, Timothy Newham,
Melanie Gurney. (2009). Making the decision to outsource human
resources. Personnel Review. 38 (3), 236-252.)

There are different views being debated with regards to HR

outsourcing. One view suggests that HR outsourcing is an
instrument creating time for HR in becoming a strategic partner
and the other view sees HR outsourcing as a cost-cutting
instrument leading to gradual removal of staff. A study
conducted by Jeroen Delmotte and Luc Sels after a survey
covering over 1264 organisations with 10 employees or more
examines whether HR outsourcing is a manifestation of strategic
HR focus, a cost-cutting HR focus or both. (Jeroen Delmotte, Luc
Sels. (2008). HR Outsourcing: threat or opportunity?. Personnel
Review. 37 (5), 543-563)

In a research conducted by Gyeung-Min Kim and Hyun Jung Won

have focussed on the outsourcing needs of small and medium
enterprises(SMEs) in each of the following HR sub-processes after
which these outsourcing needs are analyzed against the
characteristics of the companies such as company size, operating
environment and lastly how (BPO) service models are developed
according to the characteristics of the company. Thius study also
suggests that BPO service industry with two different service
models partially integrated model where e-recruiting and e-
learning are integrated and fully integrated model where all the
HR sub-processes are integrated. (Gyeung-Min Kim, Hyun Jung
Won. (2007). HR BPO service models for small and medium
enterprises. Business Process Management Journal. 13 (5), 694-
706.)

Case against Outsourcing

Even though there are many benefits to outsourcing not

everybody agrees with it. According to Dr. John Sullivan
outsourcing HR is a tactical solution which has equal chances of
back firing as succeeding. Some of the key reasons to avoid
outsourcing are

 It does not give any competitive advantage to the firm

  It can stunt the growth and capabilities of the HR function
 Going by the past experiences, cost savings that were
initially promised never materialized.
 There is no guarantee of information security and vendor
longevity.

There are some cases where the vendors develop a solution for a
firm at its expense and then sell the newly developed solution to
another firm. Thus if an organisation wants innovation and
develop competitive advantage it has to do it itself rather than
relying on a third party to do it for them.

Also outsourcing adds to the cost of managing contracts, due

diligence, legal fees, customisation and consulting services which
in turn can drive the forecasted costs considerably. He also says
that most savings delivered by outsourcing are not real savings
but mere transferring from one expense to the other.
Once the internal staff of an organisation is eliminated then the
organisation has to be on the mercy of the vendor. Also the
vendors tend to increase their rates upon renewal thus leaving
very few choices for the organisation.
http://www.drjohnsullivan.com/newsletter-archives/50-the-case-against-
outsourcing-hr
Methodology

For this research a combination of primary and secondary data

would be used which is also known as mixed methods.

Under Primary data set of questionnaires and interviews would

be taken from the HR of the companies who have outsourced a
part or complete HR Department. In the beginning the questions
asked would be similar however as the interview progresses the
questions asked would be pertaining to the subject that evolves
through the conversation. Also a set of questionnaires and
interviews would be prepared for HR providers who act as
vendors to the companies who want to outsource. The questions
would focus more on how and what they do to make sure that
their clients are well satisfied with the service they provide.
What is their level of interference in the management of
companies HR policies and so on.

Under secondary data the information collected would be from

journals, newspapers, magazines internet etc.

All the activities carried out at all stages would be done ethically
and confidentiality of each participant would be maintained.
References

Mark Saunders, Philip Lewis, Adrian Thornhill (2009).Research

Methods for Business Students. 5th ed. UK: Prentice Hall

Maurice F. Greaver (1999). Strategic Outsourcing. USA: Amacom

Simon Domberger (1998). The Contracting Organisation. Oxford

University

(Kippenberger. (1997). Outsourcing: How close to the core can

you go. The Antidote. 2 (6), 20-21.)

(Jean Woodall, William Scott-Jackson, Timothy Newham,

Melanie Gurney. (2009). Making the decision to outsource human
resources. Personnel Review. 38 (3), 236-252.)

(Jeroen Delmotte, Luc Sels. (2008). HR Outsourcing: threat or

opportunity?. Personnel Review. 37 (5), 543-563)

(Gyeung-Min Kim, Hyun Jung Won. (2007). HR BPO service

models for small and medium enterprises. Business Process
Management Journal. 13 (5), 694-706.)

Michael Dickmann, Shaun Tyson. (2005). Outsourcing payroll:

beyond transaction-cost economics. Personnel Review. 34 (4), 451-
467.

Emerald Group Publishing Limited. (2005). The offshoring craze:

What to think about before you jump. Human Resource
Management International Digest. 13 (3), 36-38

Glenn Davidson. (2005). Why HR outsourcing continues to expand:

Successful companies excel by focusing on what they do
best. Human Resource Management International Digest. 13 (3), 3-
5.

Offshoring and the role of HR – CIPD Survey Report 2006

Karen V Beaman (2004). Out of site: an inside look at HR
outsourcing. USA: IHRIM Press Book

Edward E. Lawler, Jac Fitz-enz (2004). Human resources business

process outsourcing: transforming how HR gets its . California:
Jossey- Bass

Web

http://business.rediff.com/interview/2010/may/17/interview-with-dilip-r-
vellodi-chairman-sutherland-global-services.htm.

Dr. John Sullivan. (2003). The case against Outsourcing

HR. Available: http://www.drjohnsullivan.com/newsletter-
archives/50-the-case-against-outsourcing-hr. Last accessed May 16,
2010.