Human Resources Outsourcing and Employee Motivation

What are the effects of human resources outsourcing on leadership performance and employee commitment?

Outsourcing has become a global powerful strategy by “which an organization delegates major, non-core functions to specialized and efficient service providers” and thus basically outsourcing is a strategy by which organisations can focus on their core competencies. (http://www.bsu.edu/mcobwin/ajb/?p=146)

Human resource management has come a long way. From the times when HR was an intrinsic aspect of a company to the present times when entire Human Resource Functions are being outsourced.  There has been an increase in HR outsourcing over the years including by small businesses and this is believed to go up over time (http://smallbusiness.chron.com/impact-hr-outsourcing-business-performance-2505.html) The functions of HR being currently outsourced include recruitment, managing payment and benefits packages, unemployment claims and HR related matters. The extent of outsourcing could be from individual functions to whole department functionality, depend upon the needs and requirements of the businesses.  Companies may presumably find it simpler to just outsource this job to those who are specialised in it rather than wasting resources employing people and equipment which would be far too costly for it to manage. The resultant savings and profit could be diverted into other areas of the business which would need sprucing up, need man power and resource. (http://smallbusiness.chron.com/impact-hr-outsourcing-business-performance-2505.html) In addition, the advantage of HRO is that it enables small companies to avail of the facility of highly experienced HR personnel which would otherwise be not available to them and in that sense HRO helps in levelling the differences to a certain extent between small and established companies as far as recruitment and staffing opportunities are concerned. In addition, it will help the company to slowly and steadily build up its HR team over time without pressures.  Many studies have shown towards the positive impact of outsourcing on company productivity and efficiency as well as product. Kotabe (1989) emphasises that companies can see an improvement in their organisational performance by outsourcing their non core competencies to specialist organisations. Further Ulrich (1998) says that core activities are at the heart of the organisation’s success are transformational in nature and create unique value while non core activities such as HR processes (payroll management) are more of transactional activities, routine and can be performed by someone else, if it is affordable to do so.

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While companies justify this stating that it helps them in the long run and ups the efficiency and minimise sloppiness and HR headaches as well as save up on resources and funds and it really looks good on paper, how much does it really impact the overall performance of the leadership and commitment of employees to the organisation? There have been some negative opinions of the impact of HRO. For companies to succeed well in their vision and mission, they need to have a human touch where their employees are concerned. The employees should feel like being a part of the organisation and feel motivated and have ownership in the organisation. And the Human resources department play a vital role in this by ensuring and engaging employees to be interested as far as their company is concerned. So, by outsourcing the entire HR functions may lead to a lack of connection between the employees and the organisation, they may not feel the passion and dedication for the organisation and this in turn would affect their work performance. In addition, an external outsourced HR functionality would negatively impact the communication between the different hierarchical levels in the organisation as there would be no communication mediators during critical times of conflict between the organisation and the employees regarding matters of salary, performance and other interpersonal matters.  IN addition, Leaders may not feel so emotionally compelled to take interest in their employees, it may breed more impersonal relationships which may go against the organisation‘s success as it disturbs the organisational culture and trust.  The introduction of outsiders will make relationship management cumbersome owing to the likelihood of different styles of operation and will breed stress and negativity in the employees. (Corby,1998) (Kshetry, 2007) (Belcourt 2006)  Sullivan (2007) argues against the dependence on HRO by stating that outsourcing HRO is actually restrictive and limits the growth of the personnel involved and does not necessarily provide organisation with an advantage. There is not much savings involved and more importantly, there is the serious aspect of security risks as the company shares its internal information with outsiders.

Therefore, in this regard a balance is essential as far as outsourcing  HR is concerned. Only those functions should be considered for outsourcing, which are not transgressing on company culture and employee morale and which are unavoidable from the company’s perspective.



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performance, and the role of e-commerce: A dynamic perspective”, Industrial

Marketing Management, Vol. 37, pp.37−45

Kshetri, N. (2007), ‘Institutional factors affecting offshore business process and

information technology outspurcing’, Journal of İnternational Management, 13,


Sullivan, J. (2004). The case against outsourcing HR. Canadian HR Reporter, 17(3),


Sullivan, J. (2006). HR go

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