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Organizational Size Affects HR Outsourcing

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Organizational Size Affects HR Outsourcing

Abstract

In today’s business world, the cost-benefit of developing high organizational quality has become the bloodline of competitiveness. Human resource (HR) functions and organizational culture are instrumental in determining a firm’s effectiveness and performance. Studies consider outsourcing as one of the important tools for achieving core competencies. The overwhelming evidence comes from both the theoretical view and practitioners, making the discussion about the cost-benefit of outsourcing controversial. Regardless, globalization and constantly changing consumer preferences have transformed the enlisting of external services or expertise into one of the most adopted business plans. However, the evidence of the real effects of the practice is scanty. Thus, this study analyzes an organization’s influence on outsourcing HR functions and evaluates the impact of a company on the practice’s decision. In this way, it is evident that the performance of outsourcing is different between large firms and small firms.

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How Organizational Size Affects HR Outsourcing

Outsourcing practice has become an integral part of Human Resource (HR) operations and a source of competitive advantage. Studies show that organizations, especially large ones, usually hire at least one HR function. The idea is to explore tactics to remain competitive in the face of modern economic conditions. Some of the benefits that companies stand to benefit from enlisting the help of outside organizations to complete certain tasks include cost-cutting, improved service delivery, the opportunity to leverage competencies not available internally, and improved concentration on strategic issues. Despite the many advantages of hiring parties outside the organization, anecdotal evidence suggests that increased reliance on this practice discourages innovation. Meanwhile, company size plays a significant role in the implementation of outsourcing practices. The size of an organization may provide important clues concerning the appropriate action when considering outsourcing. This study analyzes organizational influence on outsourcing HR functions evaluates the impact of a company on the practice’s decision, and determines the cost-benefit of outsourcing between large firms and small firms.

Analysis of Organizational Influences on Outsourcing HR Functions

Organizational performance is one of the factors that influence outsourcing practice. Essentially, firms are in the business to make a profit, and they put measures in place to cut costs and increase profits. As a result, Abdul‐Halim et al. (2009) posit that outsourcing business processes creates an incentive for firms to allocate resources effectively. Most organizations believe that such an undertaking is cost-effective. It better places them to focus on their core competencies and purchase products and services from expert agencies than to produce them in-house. A typical example is a large television company that outsources its internet services from another firm to concentrate on strategic issues. To many companies, doing so from other companies reduces the risk of functions, ultimately reducing running costs and improving performance. Thus, most firms pursue outsourcing to influence the success of their businesses.

Outsourcing of HR Functions and Customer Satisfaction

Studies on customer relationship management intimate that a high level of customer service within businesses has become standard. Quite often, consumers anticipate fast, flexible, and timely delivery of goods and services, not to mention customized solutions (Świtała et al., 2019). Usually, intra and inter-firm activities are initiated to achieve customer satisfaction. Gibbs and Humphries (2009) agree with this sentiment and argue that HR outsourcing is a strategic move and goes a long way in improving the flexibility and quality of one’s workforce. At the same time, it fosters a company’s ability to accommodate change and stay ahead of the competition. For instance, some companies outsource their call center operations, such as minimal waiting time for the person on call, to improve customer experience and loyalty. In the long run, offering customer value that meets their expectations in a cost-effective way. In this regard, the need for increased customer satisfaction influences outsourcing decisions.

How Outsourcing Address Organizational Issues

Outsourcing addresses organizational issues by enhancing efficiency and productivity. Empirical studies confirm that HR outsourcing often pays much attention to redeploying resources, restructuring the HR department, and refocusing activities. According to Abdul-Halim et al. (2014), these focus areas greatly influence partnership quality and service quality within an organization. Companies with the expertise in selecting their outsourcing vendors and managing the relationship build competitive advantage. Such firms identify their areas of competencies that generate more profits and choose to enlist other business activities, products, or services (Abdul-Halim et al., 2014). This approach is mediated by better expertise, improved products and services, and software exposure, aspects that enhance efficiency and productivity. For example, an external procurement of an HR function may generate know-how-related effects whereby service providers may be company members, eventually improving specific business activities in an organization. In effect, the external employees increase the efficiency of the outsourcing firm and ultimately its productivity.

What are the positive and negative ramifications for HR professionals in organizations that outsource some HR functions?

Outsourcing of HR functions is seen as an opportunity for the HR role and a threat to their career paths. Several developments linked with this HR practice are expected to reduce the range of work allocated to HR professionals. In one way, organizations are rethinking the strategic functions of HR managers. These professionals are expected to handle many tasks, including being strategic partners, championing employees, and being change agents and administrative experts (Delmotte & Sels, 2008). However, other practices are entirely removed from the department with the delivery mechanism of outsourcing HR practices. With outsourcing a cot-cutting tool that gradually reduces HR staff, the practice poses doom to the career paths of HR personnel.

Implications for HR Managers’ Career Paths and How They Can Maintain Viability and Thrive       

In the face of the dwindling strategic roles of HR departments, HR professionals are required to keep their expertise up-to-date. HR professionals are virtually tasked with developing and managing a complex web of relationships within their organizations; hence, they must possess substantial skill sets (Delmotte & Sels, 2008). In this regard, many companies consider contracting other HR functions outside the organization a viable practice thanks to the HR’s competency profile. These professionals could maintain their worthiness in such situations by keeping abreast with the most current transactional and strategic HR activities. For instance, they could implement training courses geared towards improving service quality, reducing risks, and achieving flexibility within their organizations. In so doing, some HR managers will thrive since they will be equipped to handle the core activities that come with their roles and only focus on enlisting external services for non-core activities.

Evaluate the impact of company size on organizational outsourcing decisions.

Yes, it is likely that the relationship between outsourcing practices is not the same for all companies. Instead, there is a clear pattern to how large organizations handle outsourcing to their HR functions, which is different from small firms. The moderating effect of firm size is often tied to transactional HR activities, including training and payroll functions. As Świtała et al. (2019) put it, firm size is regarded as a moderator variable and affects the level of organizational formalization. Illustratively, company size moderates functions, such as payroll and training, on performance in similar ways. According to transaction cost theory, smaller firms realize lower costs when outsourcing payroll and training than performing these activities in-house (Delmotte & Sels, 2008). A worthwhile explanation behind this phenomenon is that such companies lack vendors’ efficiencies emanating from experience and scale effects (Gibbs & Humphries, 2009). Additionally, from a resource-based standpoint, small firms have limited capabilities, forcing them to acquire resources from other companies. Conversely, larger firms are more likely equipped to design and implement successful in-house payment and training activities. Furthermore, hiring and equipping specialized employees for these organizations is readily justifiable courtesy of the scale of economies for staff training. Therefore, the effect implies that outsourcing activities such as payroll and training in large companies may realize less benefit to performance compared to small firms.

Firm Size as the Most Influential Factor in Outsourcing

From the analysis, it is clear that firm size is one of the most influential factors determining outsourcing performance. In other words, while large firms can implement in-house initiatives programs to produce a highly competent workforce, the cost of such programs ends up reducing their values. This is another reason to believe that an organization’s value depends on its strategic context. Ideally, firm size is an influential variable that plays a vital role in the relationship between HR outsourcing and performance.

Conclusion

Outsourcing HR functions is positively correlated with organizational performance. Through outsourcing, firms can gain substantial benefits, including cost-cutting, concentrating on core competencies, and getting the opportunity to leverage the competency not available internally. Despite the multiple benefits of procuring external services, the practice is perceived as a threat to the career paths of most HR professionals. This state of affairs calls for rethinking and restructuring the HR competency profile to match the required hands-on experience and skills in the competitive business environment. The analysis further shows that outsourcing HR functions have different performances in small firms and large organizations.

References

Abdul‐Halim, H., Che‐Ha, N., & Geare, A. (2009). The influence of business strategy on the decision to outsource human resource activities. Journal of Human Resource Costing & Accounting, 13(4), 274-293. https://doi.org/10.1108/14013381011010132

Abdul-Halim, H., Ee, E., Ramayah, T., & Ahmad, N. (2014). Human resource outsourcing success. SAGE Open, 4(3), 215824401454547. https://doi.org/10.1177/2158244014545475

Delmotte, J., & Sels, L. (2008). HR outsourcing: threat or opportunity? Personnel Review, 37(5), 543-563. https://doi.org/10.1108/00483480810891673

Gibbs, R., & Humphries, A. (2009). Strategic alliances & marketing partnerships: Gaining competitive advantage through collaboration and partnering. Kogan Page.

Świtała, M., Cichosz, M., & Trzęsiok, J. (2019). Logforum, 15(1), 39-51. https://doi.org/10.17270/j.log.2019.316

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Question 

Application: How Organizational Size Affects HR Outsourcing

Text: Gibbs, R., & Humphries, A. (2009). Strategic alliances and marketing partnerships: Gaining competitive advantage through collaboration and partnering. London, NI: Kogan Page Limited.

Article needed: Abdul-Halim, H., Che-Ha, N., & Geare, A. (2009). The influence of business strategy on the decision to outsource human resource activities: A study of Malaysian manufacturing organisations. Journal of Human Resource Costing and Accounting, 13(4), 274–293.

Organizational Size Affects HR Outsourcing

This needs to be APA style, abstract, 4-5 in-text citations, conclusion, and reference page. Please follow the guidelines for the page count. My instructor this semester is really tough, so please do the best possible work. I trust you!

Application: How Organizational Size Affects HR Outsourcing

In the business world, expanding the size of your organization usually seems to be a worthy goal. Of course, it does not take much research to find examples that disprove the rule. Whether bigger is better for a particular organization may be open to consideration, the Required Resources for this week support the idea that the size of an organization plays an important role in decision making processes, particularly in regards to outsourcing.

Articles, such as “The Influence of Business Strategy on the Decision to Outsource Human Resource Activities,” by Abdul-Halim and Geare (2009), in your Required Resources for this week, delve into the issues considered when deciding whether to outsource HR and other organizational functions, and HR’s role in the process. The Woodall, et al., article referenced in this week’s Discussion compares drivers that lead large versus small organizations to consider outsourcing their HR. Why are larger organizations usually more cost conscious, as the authors noted? Based on your research, is that the best approach?

From your research into organizational influences on outsourcing HR functions, what ramifications are there for HR executives in organizations that outsource HR functions? Is there a difference in the way larger organizations tend to make outsourcing decisions compared to smaller organizations?

To complete this Assignment, respond to the following in a 3- to 4-page paper:

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