Outsourcing Human Resource activities: measuring the hidden costs and benefits.

Abstract

This thesis contributes to the literature on human resource management (HRM) and business process outsourcing (BPO) in three important ways. First, this is the first study to report on the level of human resource outsourcing (HRO) for 34 distinct human resource management activities. Currently, the vast majority of the information available on HRO comes from consultant reports (Aberdeen Group, 2006; Equaterra, 2008; Towers Perrin, 2008) and articles in the popular press (Engardio, et al., 2006). Only a handful of academic studies (Gilly, Greer and Rasheed, 2004; Lawler, Boundreau and Mohrman, 2006) have systematically measured HRO. Second, this study examines the impact of HRO on organizational outcomes by attempting to detect an association between levels of outsourcing different types of HRM activities and three dependent variables: employee turnover, employee satisfaction, and customer satisfaction. Third, this study reports the assessments of several dozen expert raters as to the attributes of the 34 measured HRM activities and their suitability for outsourcing. The data set contains organizational data collected from multiple sources, including HR vice-presidents, CFOs, HR professionals, managers, organizational archives and publically available financial records. The evidence suggests that HRO levels vary along with the predictions of transaction cost economics and that outsourcing certain HRM activities may be associated with employee retention.