Analysis of the Impact of Human Resource Outsourcing on the Effectiveness of the Human Resource Function, Nairobi, Kenya
DOI:
https://doi.org/10.53819/81018102t3055Abstract
This research explored the impact of outsourcing human resource activities on the effectiveness of the human resource function in HR departments in firms registered with the Institute of Human Resource Management (IHRM) in Nairobi, Kenya. The study was anchored on The Transaction Cost Economic theory which emphasizes minimization of resource cost either through concentrating on core competencies and subcontracting other non-core areas of operation or subcontracting even their primary activities to others that can perform them less resource costly thereby earning some returns which is in form of the difference between the value of the contract and the cost of its execution. The target population of the study was 259 HR departments of firms registered with IHRM. Non-probability purposive sampling was used in selecting the respondents who are HR department’s representatives. A sample size of 72 organizations. The data was analyzed using both descriptive and inferential statistics through computer based Statistical Package for Social Sciences (SPSS). The study findings showed that training & development outsourcing and compensation outsourcing had significant and positive effect on the effectiveness of the HR function. However, recruitment outsourcing had insignificant effect on the effectiveness of the HR function. In addition, the vendor characteristics moderates the relationship between recruitment outsourcing and Effectiveness of the HR function (β =. 314, ρ< .05), relationship between training outsourcing and Effectiveness of the HR function (β = .550, ρ< .05), relationship between compensation outsourcing and Effectiveness of the HR function (β = 0.419, ρ< .05). Thus, the study concludes that training & development outsourcing and compensation outsourcing are vital HR outsourcing activities in improving the effectiveness of the HR function. Therefore, the study recommends that firms should do a thorough cost-benefit analysis before outsourcing recruitment as the impact was not significant.
Keywords: Human Resource Outsourcing, Human Resource Function, Human Resource Management, Recruitment, Compensation.
References
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Agwu, M.E. & Ohaegbu, V.A. (2015) Strategic management of the benefits and challenges of HR Outsourcing in Effective Organizational Management. Journal of Business Studies Quarterly, Vol. 7, N 2, pp. 85-108.
Ahmed, U., Abdul Majid, A. H., & Mohd Zin, M. (2016). Construct validation of 17-item Utrecht University work engagement scale amongst the white collar employees of Malaysian Universities. International Journal of Academic Research in Business and Social Sciences, 6(5), 306-312. https://doi.org/10.6007/IJARBSS/v6-i5/2144
Akewushola and Elegbede (2013). Outsourcing Strategy and Organizational Performance: Empirical Evidence from Nigeria Manufacturing Sector. European Scientific Journal. Vol. 9, No. 19.
Alzhrani, M. A. (2020). Outsourcing Human Resource Functions and their Impact on Organizational Performance. Global Journal of Management and Business Research. Vol 20, No 4-A.
Bagga, T. (2015). Jaypee takes the express-way to strategic HR: Outsourcing deal cedes control of toll employees. Human Resource Management International Digest, 8(1), 45-61. https://doi.org/10.1108/HRMID-12-2014-0159
Bansal, A. (2014). Emerging role of Recruitment Process Outsourcing in MNCs. International Journal of Scientific and Research Publications, Vol 4, Issue 3.
Bertalanffy L. V (1972). The History and Status of General Systems Theory. The Academy of Management Journal, Vol. 15, No. 4, pp. 407-426. https://doi.org/10.2307/255139
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Boudreau, J.W. (1991). Utility analysis for decisions in human resource management. In M.D. Dunnette L.M. Hough (Eds.), Handbook of Industrial and Organizational Psychology (Vol. 2, pp. 621-745). Palo Alto, CA: Consulting Psychologists Press.
Chatterjee, S., & Hadi, A. S. (2012). Regression Analysis by Example (5th ed.). Hoboken, NJ: John Wiley & Sons.
Chaudhuri S. & Bartlett K. R. (2014). The relationship between training outsourcing and employee commitment to organization. Human Resource Development International Journal. Vol. 17 No. 2. https://doi.org/10.1080/13678868.2014.886444
Cicek I. & Demir M. (2015). Efficiency of Human Resource Management: Differences in Actual/Perceptual Performance Evaluations. Journal of Management, Marketing & Logistics ‐ JMML (2015), Vol.2(4), PP 402-422. https://doi.org/10.17261/Pressacademia.2015414543
Corbett M. F. (2004). The Outsourcing Revolution: Why It Makes Sense and How to Do It Right. Dearborn Trade Publishing.
Davari, A., & Rezazadeh, A. (2015). The Measurement of Entrepreneurial Outsourcing: Preliminary Scale Development, Dimensionality Assessment, and Construct Validation. Journal of Technology Management and Innovation. Vol. 4(13), pp.16-39. https://doi.org/10.4067/S0718-27242015000200015
Drucker, Peter F. 1974, Management: Tasks Responsibilities and Practices Harper & Row, New York
Elsaid, A. M. (2013). The effect of recruitment process outsourcing on creating competitive advantage for organizations operating in Egypt. International Journal of Business Management and Administration, Vol 2 (1), 1-7.
Eng’airo P. (2020). Moderating Effect of Services Outsourced on The Relationship Between Motives of Human Resource Outsourcing and Performance Outcomes Among Mobile Telecommunication Firms in Kenya. African Journal of Emerging Issues. Vol 2, Issue 6, Pg. 42-54
Friedman D. (2015). Demystifying Outsourcing: The Trainers Guide. https://sites.google.com/a/fd.books-now.com/en463/9781280550331-74inceGEflavap13
Gilani H. and Jamshed S. (2016). An exploratory study on the impact of recruitment process outsourcing on employer branding of an organisation. Strategic Outsourcing an International Journal. Vol. 9, No.3, pp 303-323. https://doi.org/10.1108/SO-08-2015-0020
Gitiye O. and Omondi M. (2018) Effect of Outsourcing Human Resource Functions on Performance of Manufacturing Firms in Kenya: Case Study of Capwell Industries Limited Kiambu County. International Journal of Social Sciences and Information Technology Vol IV Issue X, October 2018
Global Industry Analysts Inc (2020). Impact Survey of HRO. https://www.strategyr.com/market-report-human-resource-outsourcing-hro-forecasts-global-industry-analysts-inc.asp
Hossain M. and Abdullah A. (2017). Challenges and Impacts of Human Resource Outsourcing (HRO) in Bangladesh. International Journal of Human Resource Studies Vol. 7, No. 3, pp. 63. https://doi.org/10.5296/ijhrs.v7i3.11568
Hossain, M.S., Hussain, K., Kannan, S. and Kunju Raman Nair, S.K. (2020), "Determinants of sustainable competitive advantage from resource-based view: implications for hotel industry", Journal of Hospitality and Tourism Insights, Vol. 5 No. 1, pp. 79-98. https://doi.org/10.1108/JHTI-08-2020-0152
Igbinomwanhia, O. R., Iyayi, O., & Iyayi, F. (2013). Human Resource Outsourcing: Is the HR Function Losing Its Relevance in Organizations? KJBM, 5(1),52-68.
Johnson R.B. & Onwuegbuzie A.J. (2004). Mixed Methods Research: A Research Paradigm Whose Time Has Come. Educational Researcher, Vol. 33, No. 7 (Oct., 2004), pp. 14-26. https://doi.org/10.3102/0013189X033007014
Johnson, G., Wilding, P. and Robson, A. (2014). Can outsourcing recruitment deliver satisfaction? A hiring manager perspective. Personnel Review, Vol. 43 No. 2, pp. 303-326. https://doi.org/10.1108/PR-12-2012-0212
Kibe J. (2017). The Effect of Human Resource Outsourcing on Organisational Performance: A Case Study of Post Bank Kenya Ltd. International Journal of Research in Commerce and Management. Vol. 8, Issue No. 08
Kinyua T.M. & Kwasira J. (2014). An Assessment of the Effects of Recruitment Outsourcing On Performance of Flowers Firms in Nakuru County, Kenya. International Journal of Science and Research (IJSR), Vol 3, pp 358.
Kiptum, D. (2014). Analysis of the effects of outsourcing on organization productivity in selected parastatals in Kenya. MBA project, Kabarak University, Kenya.
Lawler E. & Boudreau J. (2012). How HR Spends Its Time: It is Time for a Change. Center for Effective Organizations ‐ Marshall School of Business ‐ University of Southern California Publication.
Madanat H. & Khasawneh A. (2018). Level of Effectiveness of Human Resource Management Practices and Its Impact on Employees’ Satisfaction in the Banking Sector of Jordan. Journal of Organizational Culture, Communications and Conflict, Vol. 22, No. 1.
Maende B. (2010) Human Resource Outsourcing Practices among International Non-Governmental Organizations in Nairobi. University of Nairobi Press.
Maidment H. (2003). Human Resource (13th Ed) McGraw- Hill, the United States of America.
Mburu E. & Rotich G. (2017). Determinants of Customer Service Outsourcing Decision Among Organizations in Kenya: A Case of Orange Telkom Kenya Ltd. International Academic Journal of Human Resource and Business Administration, Vol. 2, Iss. 3, pp. 632-652.
McCracken M. & McIvor R. (2013). Transforming the HR Function Through Outsourced Shared Services: Insights from the Public Sector. The International Journal of Human Resource Management 24, no. 8 (2013): 1685-1707. https://doi.org/10.1080/09585192.2012.725070
McIvor, R. (2010). The influence of capability considerations on the outsourcing decision: the case of a manufacturing company. International Journal of Production Research, Vol. 48, No.7, pp. 5031-5052. https://doi.org/10.1080/00207540903049423
Melia, E. (2020). African jobs in the digital era: Export options with a focus on online labour, Discussion Paper. Deutsches Institut für Entwicklungspolitik (DIE), Bonn, No. 3/2020
Ngunjiri J. (2018). Registered human resource practitioners hit 10,000. Business Daily Africa. https://www.businessdailyafrica.com/bd/corporate/companies/registered-human-resource-practitioners-hit-10-000-2187358
Norman, T.J (2009). Outsourcing Human Resource activities: measuring the hidden costs and benefits. Retrieved from the University of Minnesota Digital Conservancy, https://hdl.handle.net/11299/51001.
Nyameboame, J., & Haddud, A. (2017). Exploring the impact of outsourcing on organizational performance. Journal of global operations and strategic sourcing. https://doi.org/10.1108/JGOSS-01-2017-0001
Pandita D. & Mahato N. (2016) “A Study on Measuring the Effectiveness of Human Resources in Organizations” Research Journal, Vol XII, 85-93
Quartey, S.H. (2013). Implications of HR outsourcing for HR practitioners work behaviors: evidence from the mobile telecommunication industry in Ghana. International Business Research, Vol. 6 No. 11, pp. 178-191. https://doi.org/10.5539/ibr.v6n11p178
Rono A. (2019). Effects of Strategic Outsourcing of Non-Core Business Units on Business Performance: A Case of Glaxosmithkline Limited in Kenya. (MBA Thesis). United States International University-Africa.
Seth, M., & Sethi, D. (2011). Human resource outsourcing: Analysis based on literature review. International Journal of innovation management and technology, 2(2), 127-135.
Statista Research Department (2020). Business Process Outsourcing Industry Worldwide - Statistics & Facts. https://www.statista.com/topics/2257/business-process-outsourcing-industry-worldwide/ t Manuscript | http://medcraveonline.com
Walters, G. (2009) The effectiveness of a human resources function within a public utility. University of South Africa, Pretoria
Willcocks, L.P., Lacity, M.C., Sauer, C. (2017). Outsourcing and Offshoring Business Services. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-52651-5
Williams, M. N., Grajales, C. A. G., & Kurkiewicz, D. (2013). Assumptions of multiple regression: Correcting two misconceptions. Practical Assessment, Research & Evaluation. Vol 18(11).
Williamson O.E. (2012). Transaction Cost Economics: What Are the Questions? Draft Paper. University of California, Berkeley.
World Bank: World Development Report. 2020. Available online: https://www.worldbank.org/en/publication/wd
Yeboah, A. (2013). The Relationship between Outsourcing and Organizational Performance. European Journal of Business and Management. Vol.5, No.2.
Achonjo, E.O. (2014). The Impact of Outsourcing on the Performance of Parastatals in Kenya. University of Nairobi Press.
Agwu, M.E. & Ohaegbu, V.A. (2015) Strategic management of the benefits and challenges of HR Outsourcing in Effective Organizational Management. Journal of Business Studies Quarterly, Vol. 7, N 2, pp. 85-108.
Ahmed, U., Abdul Majid, A. H., & Mohd Zin, M. (2016). Construct validation of 17-item Utrecht University work engagement scale amongst the white collar employees of Malaysian Universities. International Journal of Academic Research in Business and Social Sciences, 6(5), 306-312. https://doi.org/10.6007/IJARBSS/v6-i5/2144
Akewushola and Elegbede (2013). Outsourcing Strategy and Organizational Performance: Empirical Evidence from Nigeria Manufacturing Sector. European Scientific Journal. Vol. 9, No. 19.
Alzhrani, M. A. (2020). Outsourcing Human Resource Functions and their Impact on Organizational Performance. Global Journal of Management and Business Research. Vol 20, No 4-A.
Bagga, T. (2015). Jaypee takes the express-way to strategic HR: Outsourcing deal cedes control of toll employees. Human Resource Management International Digest, 8(1), 45-61. https://doi.org/10.1108/HRMID-12-2014-0159
Bansal, A. (2014). Emerging role of Recruitment Process Outsourcing in MNCs. International Journal of Scientific and Research Publications, Vol 4, Issue 3.
Bertalanffy L. V (1972). The History and Status of General Systems Theory. The Academy of Management Journal, Vol. 15, No. 4, pp. 407-426. https://doi.org/10.2307/255139
Bertalanffy, V.L (1968). General System Theory: Foundations, Development, Applications. New York: George Braziller.
Boudreau, J.W. (1991). Utility analysis for decisions in human resource management. In M.D. Dunnette L.M. Hough (Eds.), Handbook of Industrial and Organizational Psychology (Vol. 2, pp. 621-745). Palo Alto, CA: Consulting Psychologists Press.
Chatterjee, S., & Hadi, A. S. (2012). Regression Analysis by Example (5th ed.). Hoboken, NJ: John Wiley & Sons.
Chaudhuri S. & Bartlett K. R. (2014). The relationship between training outsourcing and employee commitment to organization. Human Resource Development International Journal. Vol. 17 No. 2. https://doi.org/10.1080/13678868.2014.886444
Cicek I. & Demir M. (2015). Efficiency of Human Resource Management: Differences in Actual/Perceptual Performance Evaluations. Journal of Management, Marketing & Logistics ‐ JMML (2015), Vol.2(4), PP 402-422. https://doi.org/10.17261/Pressacademia.2015414543
Corbett M. F. (2004). The Outsourcing Revolution: Why It Makes Sense and How to Do It Right. Dearborn Trade Publishing.
Davari, A., & Rezazadeh, A. (2015). The Measurement of Entrepreneurial Outsourcing: Preliminary Scale Development, Dimensionality Assessment, and Construct Validation. Journal of Technology Management and Innovation. Vol. 4(13), pp.16-39. https://doi.org/10.4067/S0718-27242015000200015
Drucker, Peter F. 1974, Management: Tasks Responsibilities and Practices Harper & Row, New York
Elsaid, A. M. (2013). The effect of recruitment process outsourcing on creating competitive advantage for organizations operating in Egypt. International Journal of Business Management and Administration, Vol 2 (1), 1-7.
Eng’airo P. (2020). Moderating Effect of Services Outsourced on The Relationship Between Motives of Human Resource Outsourcing and Performance Outcomes Among Mobile Telecommunication Firms in Kenya. African Journal of Emerging Issues. Vol 2, Issue 6, Pg. 42-54
Friedman D. (2015). Demystifying Outsourcing: The Trainers Guide. https://sites.google.com/a/fd.books-now.com/en463/9781280550331-74inceGEflavap13
Gilani H. and Jamshed S. (2016). An exploratory study on the impact of recruitment process outsourcing on employer branding of an organisation. Strategic Outsourcing an International Journal. Vol. 9, No.3, pp 303-323. https://doi.org/10.1108/SO-08-2015-0020
Gitiye O. and Omondi M. (2018) Effect of Outsourcing Human Resource Functions on Performance of Manufacturing Firms in Kenya: Case Study of Capwell Industries Limited Kiambu County. International Journal of Social Sciences and Information Technology Vol IV Issue X, October 2018
Global Industry Analysts Inc (2020). Impact Survey of HRO. https://www.strategyr.com/market-report-human-resource-outsourcing-hro-forecasts-global-industry-analysts-inc.asp
Hossain M. and Abdullah A. (2017). Challenges and Impacts of Human Resource Outsourcing (HRO) in Bangladesh. International Journal of Human Resource Studies Vol. 7, No. 3, pp. 63. https://doi.org/10.5296/ijhrs.v7i3.11568
Hossain, M.S., Hussain, K., Kannan, S. and Kunju Raman Nair, S.K. (2020), "Determinants of sustainable competitive advantage from resource-based view: implications for hotel industry", Journal of Hospitality and Tourism Insights, Vol. 5 No. 1, pp. 79-98. https://doi.org/10.1108/JHTI-08-2020-0152
Igbinomwanhia, O. R., Iyayi, O., & Iyayi, F. (2013). Human Resource Outsourcing: Is the HR Function Losing Its Relevance in Organizations? KJBM, 5(1),52-68.
Johnson R.B. & Onwuegbuzie A.J. (2004). Mixed Methods Research: A Research Paradigm Whose Time Has Come. Educational Researcher, Vol. 33, No. 7 (Oct., 2004), pp. 14-26. https://doi.org/10.3102/0013189X033007014
Johnson, G., Wilding, P. and Robson, A. (2014). Can outsourcing recruitment deliver satisfaction? A hiring manager perspective. Personnel Review, Vol. 43 No. 2, pp. 303-326. https://doi.org/10.1108/PR-12-2012-0212
Kibe J. (2017). The Effect of Human Resource Outsourcing on Organisational Performance: A Case Study of Post Bank Kenya Ltd. International Journal of Research in Commerce and Management. Vol. 8, Issue No. 08
Kinyua T.M. & Kwasira J. (2014). An Assessment of the Effects of Recruitment Outsourcing On Performance of Flowers Firms in Nakuru County, Kenya. International Journal of Science and Research (IJSR), Vol 3, pp 358.
Kiptum, D. (2014). Analysis of the effects of outsourcing on organization productivity in selected parastatals in Kenya. MBA project, Kabarak University, Kenya.
Lawler E. & Boudreau J. (2012). How HR Spends Its Time: It is Time for a Change. Center for Effective Organizations ‐ Marshall School of Business ‐ University of Southern California Publication.
Madanat H. & Khasawneh A. (2018). Level of Effectiveness of Human Resource Management Practices and Its Impact on Employees’ Satisfaction in the Banking Sector of Jordan. Journal of Organizational Culture, Communications and Conflict, Vol. 22, No. 1.
Maende B. (2010) Human Resource Outsourcing Practices among International Non-Governmental Organizations in Nairobi. University of Nairobi Press.
Maidment H. (2003). Human Resource (13th Ed) McGraw- Hill, the United States of America.
Mburu E. & Rotich G. (2017). Determinants of Customer Service Outsourcing Decision Among Organizations in Kenya: A Case of Orange Telkom Kenya Ltd. International Academic Journal of Human Resource and Business Administration, Vol. 2, Iss. 3, pp. 632-652.
McCracken M. & McIvor R. (2013). Transforming the HR Function Through Outsourced Shared Services: Insights from the Public Sector. The International Journal of Human Resource Management 24, no. 8 (2013): 1685-1707. https://doi.org/10.1080/09585192.2012.725070
McIvor, R. (2010). The influence of capability considerations on the outsourcing decision: the case of a manufacturing company. International Journal of Production Research, Vol. 48, No.7, pp. 5031-5052. https://doi.org/10.1080/00207540903049423
Melia, E. (2020). African jobs in the digital era: Export options with a focus on online labour, Discussion Paper. Deutsches Institut für Entwicklungspolitik (DIE), Bonn, No. 3/2020
Ngunjiri J. (2018). Registered human resource practitioners hit 10,000. Business Daily Africa. https://www.businessdailyafrica.com/bd/corporate/companies/registered-human-resource-practitioners-hit-10-000-2187358
Norman, T.J (2009). Outsourcing Human Resource activities: measuring the hidden costs and benefits. Retrieved from the University of Minnesota Digital Conservancy, https://hdl.handle.net/11299/51001.
Nyameboame, J., & Haddud, A. (2017). Exploring the impact of outsourcing on organizational performance. Journal of global operations and strategic sourcing. https://doi.org/10.1108/JGOSS-01-2017-0001
Pandita D. & Mahato N. (2016) “A Study on Measuring the Effectiveness of Human Resources in Organizations” Research Journal, Vol XII, 85-93
Quartey, S.H. (2013). Implications of HR outsourcing for HR practitioners work behaviors: evidence from the mobile telecommunication industry in Ghana. International Business Research, Vol. 6 No. 11, pp. 178-191. https://doi.org/10.5539/ibr.v6n11p178
Rono A. (2019). Effects of Strategic Outsourcing of Non-Core Business Units on Business Performance: A Case of Glaxosmithkline Limited in Kenya. (MBA Thesis). United States International University-Africa.
Seth, M., & Sethi, D. (2011). Human resource outsourcing: Analysis based on literature review. International Journal of innovation management and technology, 2(2), 127-135.
Statista Research Department (2020). Business Process Outsourcing Industry Worldwide - Statistics & Facts. https://www.statista.com/topics/2257/business-process-outsourcing-industry-worldwide/ t Manuscript | http://medcraveonline.com
Walters, G. (2009) The effectiveness of a human resources function within a public utility. University of South Africa, Pretoria
Willcocks, L.P., Lacity, M.C., Sauer, C. (2017). Outsourcing and Offshoring Business Services. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-52651-5
Williams, M. N., Grajales, C. A. G., & Kurkiewicz, D. (2013). Assumptions of multiple regression: Correcting two misconceptions. Practical Assessment, Research & Evaluation. Vol 18(11).
Williamson O.E. (2012). Transaction Cost Economics: What Are the Questions? Draft Paper. University of California, Berkeley.
World Bank: World Development Report. 2020. Available online: https://www.worldbank.org/en/publication/wd
Yeboah, A. (2013). The Relationship between Outsourcing and Organizational Performance. European Journal of Business and Management. Vol.5, No.2.
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Published
2022-10-12
How to Cite
Akinyi , B. E., Mulili , B., & Mwanzia, C. . (2022). Analysis of the Impact of Human Resource Outsourcing on the Effectiveness of the Human Resource Function, Nairobi, Kenya. Journal of Human Resource & Leadership, 6(4), 21–41. https://doi.org/10.53819/81018102t3055
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