Outsourcing the Training Function: Results from the Field
Gainey, Thomas W., Human Resource Planning
Brian S. Klaas
The amount of training outsourced by organizations continues to increase, yet few insights have been offered by researchers to guide training professionals in their use of outside suppliers. In this study, we questioned 323 training managers and directors throughout the United States about their outsourcing practices. On average, we found that responding organizations outsourced about 30 percent of their training. Most respondents indicated that outsourcing resulted in increased performance in the training area, and improvements in the design and delivery of training. Training professionals also expressed a high level of overall satisfaction with their training suppliers. Interestingly, however, only about 29 percent experienced a reduction in training costs as a result of outsourcing. Outcomes associated with outsourcing were higher when there was more frequent vendor-client interaction, when contractual agreements were more explicit, when there was greater trust in the vendor, and when client firms' primary motivation for outsourcing was quality improvement.
Outsourcing is changing the way HR departments operate. Firms that traditionally performed all HR activities in-house are increasingly relying on outside vendors. In fact, about 93 percent of all HR departments recently reported outsourcing at least some of their work (Greer, et al., 1999).
While more administrative HR activities such as payroll and benefits are generally deemed acceptable candidates for outsourcing, there is much disagreement regarding the outsourcing of other HR activities that are more closely tied to the core competencies of a firm. One such area is training (Kapp, 2000). Certainly, there is little doubt that training plays an important role in the success of many organizations (Bassi & Van Buren, 1999). Companies such as Dow Chemical, Edward Jones, Dana Corporation, and Southwest Airlines are generally regarded as industry leaders, in large part because of their commitment to employee growth and development. Despite this, firms are increasingly outsourcing training and development activities (Buckley, 1996).
Yet, few insights have been offered by researchers into what type of training activities are being outsourced, how satisfied organizations are with training suppliers, and what steps can be taken to increase the effectiveness of outsourcing in the training area. This is problematic given that U.S. employers spend more than $54 billion each year on formal training programs (Industry Report, 2000). Thus, our study attempts to address some of these questions as well as provide some guidelines for firms considering the "make versus buy" decision in the training area.
The Root of Indecision
Training professionals often struggle with deciding when to use outside vendors to provide training and development services. For example, one training director in this study observed, "On one hand, you sometimes have the staff or resources in-house, so why go outside? On the other hand, you have to stay ahead of the curve, and this often requires bringing in fresh perspectives. So, sometimes it is really a tough call." Decisions about whether to outsource in the training area are difficult in part because while some firms report achieving positive outcomes from outsourcing, others report being frustrated by their efforts to make effective use of outsourcing in the training area (Baker, 1996; Kaeter, 1995). These decisions are also difficult because the outsourcing option offers both potentially powerful advantages and significant risks (Cook, 1999).
With regard to potential advantages, outsourcing can increase an organization's access to expertise and specialists (Csoko, 1995). Because of rapid changes in technology and legislation, many HR departments lack the internal resources and expertise to keep abreast of incessant changes in the external environment. …