IMPACT OF OUTSOURCING HUMAN RESOURCE FUNCTION ON ORGANIZATION PERFORMANCE
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IMPACT OF OUTSOURCING HUMAN RESOURCE FUNCTION ON ORGANIZATION PERFORMANCE
Chapter One
INTRODUCTION
1.1 Background for the Study
The discussion over human resource (HR) outsourcing is polarised. Some view HR outsourcing as an opportunity for the HR function, while others regard it as a danger. The first viewpoint proposes that HR outsourcing is a tool for HR to become a strategic partner. The second viewpoint sees HR outsourcing as a cost-cutting tool that steadily reduces HR manpower. (Delmotte; Sels, 2008).
With the rise of globalisation, outsourcing has become a significant corporate strategy, and a competitive advantage can be achieved by having products or services produced more effectively and efficiently by outside vendors (Yang et al. 2007; McIvor, 2008).
The necessity to respond to market changes on a daily basis, as well as the challenge of anticipating their direction, necessitates that organisations focus on their core competencies and capabilities.
Outsourcing has traditionally been defined as “using outside resources.” Outside means creating value from outside, not within, the organisation (Yang et al. 2007).
Outsourcing enables businesses to focus on their core competencies by reallocating limited resources to strengthen their core product or service (Lee and Kim, 2010) and to strategically use outside vendors to perform service activities that were previously internal functions (Raiborn et al. 2009;
Elmuti, 2004; Bustinza et al. 2010). Outsourcing may also include the transfer of both personnel and physical assets to the supplier (McIvor, 2005).
Efficiency in various organisations refers to how well inputs such as staff, assets, and subsidies are allocated to achieve the highest output such as loan volume, financial self-sufficiency, and poverty outreach (Balkenhol, 2007).
Balkenhol (2010) also defines efficiency as the best mix of staff time, staff number, and operational costs to disburse and reach the greatest number of loans and clients, particularly the poor, while providing a variety of valuable services.
In other words, when an organisation strives for efficiency, management can focus on tasks that produce better results at a lower cost to the units and clients. As a result, emphasis will be placed on building appropriate product lines, developing an effective market strategy, improving targeting efficiency, and gradually removing supply bottlenecks. Gonzalez Vega (2003)
as mentioned in Martinez-Gonzalez (2008), suggests that because there are potentially few technically trained workers in the sector of microfinance, existing money may be misapplied.
The absence of incentive packages may also influence the behaviour of employees and management, while lapses in decision making and policy execution, erroneous regulation and inappropriate interference by funders, and incorrect product designs and methodology all result in massive waste. Martinez-Gonzalez (2008) states that improving the microfinance industry will not be sufficient if wastes persist.
These organisations’ businesses rely heavily on their workforce. An organisation can have all the wealth and resources in the world, but without a staff to organise ideas, manufacture products, and sell them, nothing will ever reach consumers (Turner and Turner 1995). Long-term, the use of various human resource outsourcing tactics has been linked to organisational performance.
Furthermore, where proper outsourcing tactics are used, organisational performance has been shown to improve. Outsourcing practices influence organisational outcomes
including if some practices have a greater impact than others and whether complementary or synergistic practices can improve organisational performance even more.
1.2 Statement of Problem
Making a profit from any firm is heavily reliant on the workforce. A company organisation can have all of the capital and resources in the world, but without an organised and competent workforce to produce and market a product, there can be no profit maximisation.
There is still much disagreement about how outsourcing techniques affect organisational outcomes, whether some practices have a greater impact than others, and whether complementary or synergistic practices might improve organisational performance even further.
Similarly, many HR functions these days struggle to move beyond the role of administration and employee champion, and are viewed as more reactive than strategically proactive partners by top management. HR organisations also struggle to demonstrate how their activities and processes add value to the company (Smit, 2006).
1.3 Object of the Study
The primary goal of this study is to determine the influence of outsourcing human resource functions on organisational performance. Specifically, the study intends to:
1. Discover the role of HR in an organisation.
2. Evaluate the impact of outsourcing HR functions on organisational performance.
3. Discover the reasons why organisations outsource HR functions.
4. Examine the issues that restrict an HR’s successful performance in the organisation.
1.4 Research question
1. What is HR’s responsibility in an organisation?
2. Is there a major impact of outsourcing the HR function on organisational performance?
3. What are the reasons why organisations outsource HR functions?
4. What elements restrict HR’s successful performance in an organisation?
1.5 Research Hypothesis.
Ho: outsourcing the HR function has no substantial influence on organisational performance.
Hello, outsourcing the HR function has a huge impact on the organization’s success.
1.6 Significance of the Study
This research will educate organisations on the importance of human resources and encourage them to examine the impact of outsourcing on their operations.
As Nigeria’s unemployment rate climbs, the government will have more insight into scrutinising policies of corporations who outsource their activities, as this effects job creation, which aids economic development.
The research will further educate businesses about outsourcing, ensuring that if an organisation decides to use this form of operation, all choices are thoroughly explored.
The study will also assist organisations in estimating the relative cost of outsourcing to their companies, and it will act as a guideline and reference point for future research on the same topic.
1.7 Scope of Study
This research will be undertaken in Ado-Odo LGA in Ogun state because the local government area is home to numerous organisations. Additionally, this research will analyse the role of HR and the benefits of outsourcing HR functions.
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