Making the decision to outsource human resources

The purpose of this paper is to explore and describe how the decision to outsource human resources was made by 12 large and five small organisations.

Desk research and key informant interviews with senior HR staff who lead the decision to outsource human resources in a purposive sample of organisations identified through an initial search of the professional literature and nomination by an expert panel.

The research identifies a number of drivers that lead organisations to consider outsourcing their HR. In large organisations cost considerations are dominant, but other factors arise out of the organisational history and context, and very often, senior managers from outside the HR function are very influential. For most organisations, paradoxically, the decision to outsource appears not to be made on the basis of a thorough analysis of costs, with consequences for the quality of HR service offered to line managers, and also for the career paths and skill sets required from HR staff.

This study focuses upon the perceptions and experiences of senior HR managers, but excludes the perceptions and experiences of all staff employed in the HR function. Also, while the use of a qualitative research design makes it possible to uncover the individual perceptions and motivations of the key informants in the sample, there are obvious limitations in respect of statistical generalisation.

The findings relate mainly to the future shape of the HR function in organisations where HR activity is outsourced, with consequent implications for the skill sets and career paths for HR professionals.

The views of HR directors and senior managers have provided a valuable insight into the strategic decision to outsource HR activity and will be of interest to those involved in the same field.