Academic journal article Journal of Business Economics and Management

HR Outsourcing Success: Does Partnership Quality Variables Matter?

Academic journal article Journal of Business Economics and Management

HR Outsourcing Success: Does Partnership Quality Variables Matter?

Article excerpt

1. Introduction

The business environment is evolving and to remain competitive, organizations have to constantly reinvent and reinforce their current operations with new ideas (Ok 2011). The organizations also are compelled to scout for new ways to generate value. The world has embraced the phenomenon of outsourcing and many organizations have adopted the principles of outsourcing to assist them expand into other markets (Wahrenburg et al. 2006). Consistent with a growing trend toward the outsourcing of activities traditionally performed in-house, many HR activities are now being outsourced (Lieven, De Corte 2008). HR outsourcing takes place when an organization contracts with an HR vendor to perform HR activities (Greer et al. 1999).

The market for the service providers of outsourced services is growing rapidly and concurrently HR outsourcing has evolved from only having a single source, to a situation where multiple service providers can be easily contracted to satisfy the difference needs of the organizations (Lilly et al. 2005). In fact, the Malaysian government has shown some support to encourage the growth of shared services outsourcing (SSO) industry (Hewitt Association 2006). Since HR outsourcing development in Malaysia has not been intensively studied, managers may still have lack of knowledge on how to select the right service providers and to manage the outsourcing relationship. To many organizations, managing the relationships between organizations and service providers has become increasingly complex. This is because both parties may have different desires and agenda when developing and maintaining HR outsourcing relationships (Lieven, De Corte 2008). Moreover, the hidden cost of constantly having to monitor the outsourcing activities seems to hinder long-term commitment between the organizations and the service providers (Elmuti, Kathawala 2000).

Additionally, a poor choice of outsourcing partners can also hamper the success of outsourcing relationship (Elmuti, Kathawala 2000; Tapiero 2006). Many organizations fail to select the right partners and are not able to build a solid relationship with their service providers. Therefore to ensure on the successful relationship with the service providers, organizations must be aware that outsourcing partners should be selected based on their expertise in the operations, their cultural fit with the organizations, ability to establish strategic alliances and their willingness to adopt the philosophy that they are the organization partners may help alleviate this problem (Lau, Hurley 1997; Tapiero 2006). Along these lines, both parties need to develop a certain mechanism to strengthen HR outsourcing relationship and at the same time to consider outsourcing relationship to function more as partnership (Elmuti 2003; Lee, Huynh 2005).

Nevertheless, the existing literature on partnership seems to take the relationship of partnership quality and outsourcing success for granted (Lee 2001; Lee, Huynh 2005). In fact, there is almost next to none study has been done on the partnership quality of HR outsourcing. There should be validation whether HR outsourcing is successful when high-quality partnership exists. High quality may be a necessary condition for outsourcing success, but not a sufficient condition (Khong 2005). Consistent with the above argument, this study was designed to explore the factors of partnership quality in the context of HR outsourcing that may lead to outsourcing success. Since the trend of HR outsourcing in Malaysia is increasing (Hewitt Associations 2006) and the service providers are taking increasing responsibility in the realms of many HR functions that have traditionally remained in-house, it is imperative to understand this organization-service provider relationship.

The paper is organized in the following manner: the next section reviews the HR outsourcing literature and develops the hypotheses; the third section presents the method used in the study; the fourth section highlights overall results of the study and the final section presents the discussion, limitations and conclusion. …

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