Human Resource Management Project Topics

The Impact of Outsourcing Human Resource Function on Organization Performance

The Impact of Outsourcing Human Resource Function on Organization Performance

The Impact of Outsourcing Human Resource Function on Organization Performance

Chapter One

Objective of the Study

The main objective of this study is to find out the impact of outsourcing human resources function on organization performance, specifically the study intends to:

  1.   Find out the role of HR in an organization
  2. Analyze the impact of outsourcing HR function on organization performance
  3. Find out the reasons why organization outsource HR function
  4. Examine the factors that impede successful performance of an HR in organization



The definition of outsourcing is referred to as a perceptive of management, in which a corporation appoint as representative a number of noncore functions to services suppliers that are characterized of efficiency and expertise. In other words, outsourcing (derived from outsource i.e. external source) can be referred to as the purchase of goods or services that were internally provided at an earlier time (Elmuti & Kathawala, 2000). Outsourcing is conceived to be one of the major fundamental principles in the time of global market and e-economy, regarding the modern method to fix the eyes on the correlations among corporations. There is no structured particular course of action presented that is capable of providing the approval and encouragement to the govern of the evolution of an allinclusive outsourcing procedure without being affected by outsourcing large distribution, huge business cases and big deals of material that provides official information able to be obtained on network or press (Franceschini & Galetto, 2003). Cost-effectiveness and the restructuring of producing are conceived as the most significant factors that cause outsourcing to happen or develop. Outsourcing can help corporations’ determined exertions to be centered on core business, medium/long-term goals and chances of diversification (Linder, Cole, & Jacobson, 2002). The outsourced and the outsourcer are perceived to be the major actors of outsourcing procedures, the outsourced (customer), outsources his procedures, while on the other hand the outsourcer (the enterprise) delivers outsourced services, the interface pertaining to an organization is perceived as the owner of the procedure, regarding the two enterprises in the time of all the outsourcing activities (Franceschini & Galetto, 2003).

Whenever an organization establishes a contract with another organization in order to either provide a service or a product that is characterized by vital importance, outsourcing eventuates. Internal traditional work is transferred to an outside supplier, in addition to the employees being on numerous occasions shifted to the provider of the service, outsourcing varies from alliances or collaborations or joint ventures because resource flows are one-way, from the provider to the client, there is typically no sharing of profit or mutual contribution (Belcourt, 2006). Nearly all companies are outsourcing, and the trend is growing, in a study conducted by Hewitt Associates, (94) percent of companies subjected to the survey said they had outsourced one or more human resources functions (Gurchiek, 2005), in the event that the company needs experts and cannot afford to hire or train them, it may be a way to outsource them. Many companies want cost savings or better products or expert or software exposure as the basis for their outsourcing decision, some executives, however, treat outsourcing as a solution without first identifying what the problem is (McCauley, 2000). At least six main reasons exist to outsource organizations: financial savings, strategic focus, access to advanced technology, improved level of service, access to expertise, and organizational policy; the first reason given for the decision to outsource is to save money, organizations assume that the outsourcing of a role like wage will reduce costs, when the manufacturer, such as Ceridian, specializes in benefits administration, focuses on one field and provides this service to many companies, economies of scale can be achieved. Specialist vendors are more effective because training personnel and research and development costs can be expanded to more users (Belcourt, 2006). The second reason behind outsourcing is strategic focus; an evolution was observed in the last decade, regarding outsourcing procedures from traditional to strategic, whenever a non-critical procedure for the corporation is outsourced, it is conceived as traditional outsourcing (Franceschini & Galetto, 2003). This is the matter for actions not requiring particular qualifications by the provider, like for example services of canteen or cleaning. Whenever everything but special actions that could accomplish a distinctive competitive edge is outsourced, it is perceived as strategic outsourcing (Quinn & Hilmer, 1994;Willcocks & Choi, 1995), enterprises that have sought out to outsource companies reported decreasing administrative tasks by more than half and increasing their strategic emphasis by 40% (Oshima, Kao, & Tower, 2005).

Technology and the ability to get access to it is the third factor that plays a role in the need for organizations to outsource, it can be seen as a driving force behind outsourcing trend, many functions are outsourced because organizations want to improve technical services or are unable to find technical skills or need quick and reliable access to new technologies.

Much of the traditional HR service included responding to employee inquiries or changing employee files, so interactive voice responses and companies that specialize in this service can easily handle these tasks, technology also reduces processing time for an organization, the time it takes to process an inquiry (Belcourt, 2006). Another reason for outsourcing is the enhancement in performance. The contract can include performance standards more closely than is usual for current and long-term employees. Managers can choose the’ best-of-breed’ suppliers who can employ and recruit their staff with outstanding records and greater flexibility. An additional reason given by certain outsourcing companies is that they find HR laws and regulations so confusing that they want to outsource to businesses with the specific expertise they need (Belcourt, 2006). HR departments are frequently criticized for their bureaucracy. HR customers see noticeable flexibility, response, and performance development when using a service vendor who is majored in service. Most companies can earn dominance over their level of service because their contract outsourcing can quantify outcomes (Cooke, 2004). The access to specific expertise can also be notices as a factor that causes outsourcing, the slogan is “Outsource, if someone can do better than you.” One explanation some businesses have provided for the need of outsourcing is that they consider the laws and regulations regulating HR so complicated that they want to outsource to attain specific expertise. Having experts also decreases corporate hazards and liabilities. Specialists possess the knowledge about the legislation more than anyone else and they can make sure that all the practices of a company are subjected to legislations (Belcourt, 2006) The outsourcing role is not as clear as an internal department that carries out same tasks. Many companies opt to outsource a struggling unit, for example one where workers are not doing well. Outsourcing decreases head count as well, in the public sector head counts are of great importance; the fewer payroll workers, the more satisfied the tax payer, there is an indication that the system is not as effective and problem-free as expected for companies with expertise in outsourcing (Belcourt, 2006).






In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.


Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.


According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.

This study was carried to examine the impact of outsourcing human resource function on organization performance. Ado-Odo LGA in Ogun state forms the population of the study.




This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.




It is important to ascertain that the objective of this study was to ascertain the impact of outsourcing human resource function on organization performance. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of the impact of outsourcing human resource function on organization performance.


This study was on the impact of outsourcing human resource function on organization performance. Three objectives were raised which included: Find out the role of HR in an organization, analyze the impact of outsourcing HR function on organization performance, find out the reasons why organization outsource HR function and examine the factors that impede successful performance of an HR in organization. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from  Ado-Odo LGA in Ogun state. Hypothesis was tested using Chi-Square statistical tool (SPSS).


In conclusion, HR outsourcing can have a significant impact on organizational performance, but the outcomes are not universally positive or negative. It requires careful planning, vendor selection, and ongoing monitoring to ensure that the benefits of outsourcing outweigh the potential drawbacks. Organizations must weigh the potential cost savings, efficiency gains, and access to expertise against the risks of diminished control, coordination challenges, and potential loss of internal knowledge. By making informed decisions and implementing effective management strategies, organizations can leverage HR outsourcing to enhance their overall performance and achieve their strategic objectives.


Based on the findings of the study, I would like to propose the following recommendations regarding HR outsourcing and its impact on organizational performance:

  1. Conduct a thorough cost-benefit analysis: Before deciding to outsource HR functions, organizations should carefully evaluate the potential benefits and costs. Consider factors such as cost savings, access to specialized expertise, and the impact on internal capabilities. This analysis will help determine if outsourcing is the right strategic choice for the organization.
  2. Select the right outsourcing partner: Careful consideration should be given to selecting a reputable and reliable outsourcing partner. Assess their track record, expertise, and the alignment of their services with the organization’s specific HR needs. A well-matched partner will contribute to positive outcomes and enhanced organizational performance.
  3. Establish clear expectations and communication channels: To ensure successful HR outsourcing, organizations should clearly define their expectations, deliverables, and performance metrics. Establish effective communication channels and protocols to maintain regular updates and address any issues that may arise. This promotes transparency, collaboration, and accountability between the organization and the outsourcing partner.
  4. Monitor and evaluate performance: Regular monitoring and evaluation of the outsourcing arrangement are essential to gauge its effectiveness. Implement key performance indicators (KPIs) to measure the impact of outsourced HR functions on organizational performance. This data-driven approach enables organizations to make informed decisions and address any performance gaps or concerns.


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