How Organizational Size Affects HR Outsourcing

 

How Organizational Size Affects HR Outsourcing

Introduction

In the world of today mainly ravaged by competition, organizations are left with no otherwise but to look and search for new ways of generating value. The universe has clinched the outsourcing phenomenon and companies have incorporated its principles in helping them expand into unreached markets (Abdul-Halim et al., 2009). Strategic outsourcing management is perchance the most significant tool in the management field and its frontier is the innovation outsourcing. Outsourcing may be defined as the transfer of functions previously done internally to external providers (Abdul-Halim et al., 2009). Many organizations have realized the significance of outsourcing and have begun to expand this activity to majority of their business operations. Outsourcing has been involved in manufacturing operations, logistics, research and development, human resource management, information technology, and accounting. This function has therefore become a common activity.

Factors Influencing Organizations to Outsource

The organizational influences to eradicate the in-house Human Resource (HR) functions include elimination of duplication after acquisition and merger, cost reduction, and eradication of non-strategic and value added job functions. Outsourcing also allows HR experts to center on organizational effectiveness coupled with strategic and value –added job functions (Woodhall et al., 2009). Reasons to outsource are quite many depending on the organizational size and whether it is a merger or acquisition. Nonetheless, there is flexibility in allocating variable cost rather than fixed cost to HR functions and there is also concentration on main business activities (Woodhall et al., 2009).

 

 

How the Outsourcing of HR Functions Address Organizational Issues

The outsourcing of HR functions has been referred to as a strategic tool available to organizations thriving in a competitive environment. It is popular and fast gaining ground significantly due to the need by the HR department to exercise a more strategic role in an organization. The HR managers of today are anticipated to shed off their traditional duties associated with procedures and policies, and the selection, hiring, training and compensation of employees, for more strategic duties that include improving the quality perception of customers,, reduction in costs of HR administration and management of scarce resources (Thompson, 2008). Many HR managers in response to this shift in archetype, are now outsourcing their more orthodox roles (Thompson, 2008).

Positive and Negative Ramifications of Outsourcing

Benefits of outsourcing involve provision of greater concentration and awareness on key business activities, improved service delivery to stakeholders, and heightened HR performance with reference to reduction in cost such as lay-offs (Abdul-Halim et al., 2009). Other advantages include increased capacity, improved quality, improved financial performance, increased profitability and productivity, lower risks and innovation costs, and improved organizational competitiveness. However, some problems are eminent. Outsourcing normally reduces the company’s control on how particular services are delivered and this increases the company’s exposure to liability. Another drawback is the elimination of internal HR professionalism (Woodhall et al., 2009). In this scenario, morale would be undermined and if the downsizing of staff is heavy, a few HR experts remain to carry the load and this can lead to role strain.

 

 

Implication for the Carrier Paths of HR Professionals

There are far-reaching implications for career paths of HR experts in an outsourcing scenario or situation. HR professionals who are forward-thinking and are strategic thinkers as well as leaders of change will automatically survive in such a scenario. These experts in the field of human resource management identify the revolution and changes that transpire due to the age of information as well as how technological breakthroughs will explode in the forthcoming years (Thompson, 2008). HR professionals are conversant with the fact that for them to protect themselves from the job downsizing strategy with the aim of reducing the organizational cost, it is imperative that they improve their value in the organization by being strategic partners and also able to confirm their worth in the organization. In maintaining this momentum, these professionals should further their education.

The Impact of Company Size on Organizational Outsourcing Decisions

The size of a company does not essentially dictate the outsourcing decision by that organization. Even smaller companies would need to concentrate on development of core competencies and not branching out into unknown areas that need specialized skills (Thompson, 2008). Acquired companies merge their HR departments and therefore, downsizing coupled with layoffs inevitably occur. Abdul-Halim et al. (2009) indicates that the decision in outsourcing HR functions is significantly determined by the business strategy type exploited by an organization. The author presents four types of business strategies and include proactive, quality- based, reactive, and breadth.

Quality- based business strategy creates products and services with high standards of quality. In this particular strategy, HR functions that are transactional in nature such as benefits and payroll are normally outsourced and this frees the time of the HR professional on concentration on the retaining and attracting the best talent. A proactive strategy helps a company to focus on the product or service differentiation hence its reaction to the ever changing business environment. In this strategy, the HR functions that are non-strategic such as routine and standardized functions are outsourced. A breadth strategy assists the company to focus on myriad product or service lines with a broad customer base. This strategy enables the HR professionals to maintain most of their functions in-house and not out-house. Lastly, the reactive strategy helps an organization to try in producing goods and services at a rate which is cheaper as compared with that of the competitor. With this strategy in operation, a reactive company is more tending in outsourcing all its HR functions with a dramatic attempt to cut costs (Abdul-Halim et al., 2009).

 

References

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 Organizations. Journal of Human Resource Costing and Accounting, 13(4), 274-293.

Thompson, P. (2008). Will HR be about strategic partnership or operational support in 2028? Personnel Today, 12.

Woodhall, J., Scott-Jackson, W., Newham T., & Gurney, M. (2009). Making the decision to outsource human resources. Personnel Review, 38(3), 236-252.

 

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