OUTSOURCING HUMAN RESOURCE FUNCTIONS AND PERFORMANCE
1.1 BACKGROUND TO THE STUDY
Human resources outsourcing evolved from hiring payroll processing companies in the 1990s to delegating tasks previously performed by human resources assistants and specialists, such as recruiting, coordinating benefits and handling unemployment claims. Some small businesses outsource entire human resources departmental functions; however, many companies outsource singular processes. Small businesses to large corporations decide for one reason or another that outsourcing human resources functions is a way to improve efficiency and minimize staffing costs. Large organizations that employ thousands of people may find it’s simpler to outsource a process, such as payroll, rather than employ two to three payroll clerks and purchase sophisticated technology than engage the services of an organization that focuses entirely on processing payroll (Elmuti, 2003). Small companies might decide that outsourcing human resources processes is more cost-effective and efficient than creating a human resources department while the business is focused on other projects associated with starting a new business (Elmuti, 2003).
Organizational performance is an important consideration when small business owners weigh the pros and cons of Human resource outsourcing. One school of thought is that a organizations can focus its energy and expenditures on developing the product it sells. This enables organization to allocate its resources to areas that include engineering and research and development, instead of recruiting staff, maintaining personnel files and other human resources tasks. The other school of thought has more to do with human capital and talent believes that an organization may find herself without the talent she needs to build an efficient human resources department. In this case, Human resource outsourcing resolves the dilemma organizations face during the search for an in-house human resources expert. In the first scenario, an organization directing its focus on product design and sales may determine the expense of Human resource outsourcing can be easily justified by more attention given to product sales. An organization that doesn’t have the requisite talent to lead a human resources department can justify the expense of Human resource outsourcing by the confidence in the level of competency Human resource outsourcing companies offer.
A well-designed human resource outsourcing strategy can allow organizations to focus on their core competencies in order to increase efficiency without having to invest in people and technology (King, 2007; Lau & Zhang, 2006). Additionally, this production strategy permits organizations to become increasingly profitable, and better able to service both local and international customers (Maidment, 2003). An example of this is Nike Inc. which outsources nearly 100 per cent of its shoe production, locally manufacturing only key components of the “Nike Air” product. As a consequence of this outsourcing, Nike Inc. can focus solely on its core competencies, such as production design, marketing, distribution and sales (Entrekin & Court, 2001).
1.2 STATEMENT OF THE PROBLEM
In recent years, organizations have outsourced an expanding variety of activities including human resource functions in an attempt to improve service and product quality, reduce production cycle times, lower costs, increase their focus on core competencies, and, in general, enhance organizational performance. organizations appear to be focusing on a relatively narrow set of functions and are contracting with outside suppliers to perform the others.
Despite the trend toward Human resource outsourcing, evidence of its performance effects is scarce. Appealing arguments have made the case both for and against outsourcing as a means of achieving long-run competitive advantage. On the one hand, by outsourcing human resource management tasks to specialist organizations, organizations may better focus on their most value-creating activities, thereby maximizing the potential effectiveness of those activities. In addition, as outsourcing increases, costs may decline, and investment in facilities, equipment, and manpower can be reduced). On the other hand, anecdotal evidence suggests that increased reliance on outsourcing may lead to reduced innovation (Kotabe, 1992), eventual competition from outsourcing partners (Bettis et al., 1992), and reductions in control of the task in question. Thus, the performance effects of outsourcing are uncertain. However, the researcher is examining the impact of outsourcing human resource functions on organizational performance at Stanbic IBTC Bank Plc.
1.3 OBJECTIVES OF THE STUDY
The following are the objectives of this study:
To examine the impact of outsourcing human resource functions on organizational performance at Stanbic IBTC Bank Plc. To identify the benefits derived in outsourcing human resource functions at Stanbic IBTC Bank Plc. To ascertain the relationship between Human resource outsourcing and organizational performance.
1.4 RESEARCH QUESTIONS
What is the impact of outsourcing human resource functions on organizational performance at Stanbic IBTC Bank Plc? What are the benefits derived in outsourcing human resource functions at Stanbic IBTC Bank Plc? What is the relationship between Human resource outsourcing and organizational performance?
HO: There is no significant relationship between outsourcing human resource functions and organizational performance at Stanbic IBTC Bank Plc
HA: There is significant relationship between outsourcing human resource functions and organizational performance at Stanbic IBTC Bank Plc
1.6 SIGNIFICANCE OF THE STUDY
The following are the significance of this study:
The findings from this study will be useful to the management of Stanbic IBTC Bank Plc and all other corporate organizations in Nigeria on how they can use Human resource outsourcing as a tool for organizational performance and effectiveness. This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.
1.7 SCOPE/LIMITATIONS OF THE STUDY
This study on the impact of outsourcing human resource functions on organizational performance at Stanbic IBTC Bank Plc will cover Human resource outsourcing approaches at Stanbic IBTC Bank Plc with a view of identifying its effect on organizational performance and effectiveness.
LIMITATION OF STUDY
Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
Bettis RA, Bradley SP, Hamel G. Outsourcing and industrial decline. Acad Manage Exec 1992;6(1):7– 22.
Elmuti, D. (2003). The Perceived impact of outsourcing on organizational performance. American Journal of Business, 18(2), 33 – 41.
Entrekin, L & Court, M. (2001). Human resource management practice: Adaptation and change in an age of globalization. International Labour Organisation.
King, W.R. (2007). The IS organization of the future: Impacts of global sourcing. Information Systems Management, 24(2), 121-128.
Kotabe M. Global sourcing strategy: R&D, manufacturing, and marketing interfaces. New York: Quorum, 1992.
Lau, K.H. & Zhang, J. (2006). Drivers and obstacles of outsourcing practices in China. International Journal of Physical Distribution & Logistics Management,36(10,: 776 – 792.
Maidment, F.H. (2003). Human resource (13thed.). The United States of America: McGraw-Hill/Dushkin.