Competitive Advantage Through HR Outsourcing


23 Mar 2015 03 Jan 2018

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Organizations getting their human resource function done out side the organization is known as HR outsourcing. With the help of HR outsourcing an organization hands over its human resource issues to be resolved by the third party and the third solves all issues related to human resource. Through outsourcing a company can avoid its internal cost to some extent and it will get better services at low cost because third party consultant holds highly competent HR professionals with them. If organization tries to hire those people it would be very costly for it. HR outsourcing gives access to those professionals at minimum cost and organizations get better solution.

Now days, organization are trying to move towards HR outsourcing. Many of the organizations now adopt this concept and because of outsourcing, they are performing better. In my research I have tried to find out whether adopting HR outsourcing gives an edge to the organization or not. I set our initial hypothesis that organization gets competitive advantage if they go for HR outsourcing. In order to get results I have conducted a small scale research and on the basis of this research I concluded my findings.


Does an organization gain competitive advantage through HR outsourcing?


HR outsourcing is gaining immense importance in the current era. Most of the organizations are now adopting HR outsourcing. It gives organizations double benefit, firstly they can avail services of key human resource professionals without hiring them and secondly organizations can get these benefits incurring very low cost. The basic objective of conducting this research is to find out the impact of HR outsourcing on organizational performance. In this research I have tried to find that organizations gain competitive advantage through HR outsourcing. What positive things they achieve through HR outsourcing. I have collected data from key HR personnel working in leading organizations. This research will assist almost every organization that is working at broader level. By analyzing the findings of this research organizations can get the idea whether they should adopt HR outsourcing or not. This research will also be helpful for those organizations that are considering HR outsourcing. I have also discovered that what benefits organizations achieve through HR outsourcing and what are other possibilities to gain other different benefits.


In the presence of theoretical model an organization identifies environmental and organizational characteristics that affect the performance of human resource in the organization. Particularly we address the issue according to the circumstance which contributes value for organization by the analysis of environmental and organizational characteristics that affect HR performance and relationship outsourcing mediates. We propose that supplier competition in HR is directly proportion to the HR depth performance.

Uncertain situation of the environment like primary, competitive and supplier give the indications to develop the relationship between the performance of HR and amount of HR outsourcing and also between supplier competition and amount of outsourcing for asset specify the latest version of the paper was presented in Houston, Texas, March, 2003 at the Southwest Academy of Management meeting and received the paper award.

It has been observed in different organizations that they are focusing on human resource outsourcing. This trend has been observed for last few years. In a research conducted by well reputed institutions of the world concluded in its findings the views of key HR personnel of different leading organizations that they outsource at least one function from the outside in order to increase productivity. P& G signed an agreement to outsource HR service in 2004 for its operation spread all over the world. HR outsourcing is gaining rapid attention by different organizations, it is strongly recommended that organization should go through all aspects while outsourcing. In different surveys it has been found that it has declined the morale of employees and customer services are also not up to standards.

It is still problem for the organizations that before going to outsourcing for the functions that previously did in the organization and decision solely based on cost and benefit analysis. (e.g.,Anderson&Weitz, 1986;Belous, 1989; Greer, Youngblood, & Gray, 1999; Gupta & Gupta, 1992; Kakabadse & Kakabadse, 2002; Lever, 1997), and Vining & Globerman (1999) in a research conducted by government agencies that through HR outsourcing organization saved up to 30% in its operating costs. In spite of that difference other studies suggest that while making decision of outsourcing cost should not be only criteria few other factors should also be taken into consideration. In those considerations it must analyze that organizations are availing services of highly competent professionals and customer satisfaction has also increased. (Barthelemy, 2003; Greer, Youngblood & Gray, 1999; Gupta & Gupta, 1992), by few experts it is said that organizations lose long term advantage (Anderson & Weitz, 1986; Greer, Youngblood & Gray, 1999, Gupta & Gupta, 1992; Lever, 1997). Studies that have been conducted very recently, Adler (2003) pointed few factors that must be considered while making decision for out sourcing, one how dependent you will be, second is spillover risk, and third is reliability of that organization, capability of that organization, long term sustainability and flexibility. The factors that discussed at first, second, third and fourth position are short term and fifth and sixth positions are long term. Even though there is no accurate method that helps us whether outsourcing is most efficient and effective. Few practical examples are available whether to manufacture or purchase from out side for example Leiblein, Reuer, & Dalsace, 2002) findings focus why organization outsource, what are the benefits of outsourcing.


Today's world of business is very dynamic; every business is striving to sustain its position in the market. HR outsourcing is an emerging concept and gaining an edge with the passage of time. Organizations are moving towards adaptation of this concept. It has been observed that HR outsourcing is beneficial for the organizations. Organizations performance increases with the help of HR outsourcing. Those organizations that have adopted HR outsourcing in their organization are performing better than those that have not focused on HR outsourcing. It shows trend towards HR outsourcing. It is utmost effort of every organization to perform at optimum level and give better result to its stakeholders. Though HR outsourcing organizations avail services of highly competent professionals who assist them to increase their productivity and ultimately this will positively affect the profits of the organizations.


In this research, I have used survey methods because this is descriptive research and nature of the situation is uncertain, in which management partially is sure about the problem. Questionnaire was used as data collection tool in which structured and close end questions were asked. Total fourteen questions were designed to ask different opinion from the respondents. In all questions different options were given to the respondent to select his choice. Finally when all questionnaire were got filed then I summarized the result in order to finalize my research findings. Apart from questionnaire literature was reviewed thoroughly. By analyzing both primary data collected through questionnaire and secondary data analyzed in literature review, I have concluded my research findings.

In this research, my sample size was thirty respondents and all were professionals working in different organizations. They participated in this research and on the basis of responses received from them I finally concluded about this research.


In this research, 30 respondents were asked to participate. Out of which 27 questionnaires were received. 3 questionnaires were rejected due to fake or incomplete data, ultimately 24 questionnaires were analyzed. All participants were highly qualified HR professionals that were performing their duties in well reputed and leading organizations. Most of the respondents were in 41 to 50 years age bracket but few of them were 51 to 60 years age bracket. All respondents had been serving in the organization for more than five years.

In the response to a question that HR department plays a vital role for the development of the organization, 83% responded strongly agree, 9% agreed, and only 8% disagrees with this statement. This shows the importance of the HR department in the organization especially in the light of these responses. Organizations which have highly competent HR professional are stronger than those that are lacking them. Majority of the responded agreed with this statement only a small percent of the responded denied this statement.

HR outsourcing leads organization towards success, in the response to this question 95% agreed this statement and 5% were neutral, they did not respond anything. From the response to this question it can be inferred that it is key success factor of the organization if it adopts HR outsourcing. HR outsourcing doubles the performance of organization, response of this question was not completely positive. 56% respondents were neutral and did comment on it, 23% agreed this statement, 21% of respondents disagreed with this statement. It can be inferred from this statement that most of the HR personnel were not sure about it because no quantitative data was available in front of them, so they reserved their response.

In the responses to this question, organizations are more competitive that are involved in HR outsourcing, 75% responded strongly agreed with this statement, 18% agreed and only 7% responded who disagreed with this statement. In regards to another question, HR outsourcing gives competitive advantage to the organizations, 88% agreed with this statement, 7% were neutral and only 5% responded disagreed with this statement. From the responses of these two questions it can easily be inferred how HR outsourcing contributes to the development of the organization. Organization attains competitive advantage due to HR outsourcing.

Organizations which are involved in HR outsourcing get their HR function done more professionally, 89% of respondents agreed with this statement and only 11% disagreed. HR outsourcing plays vital role in the success of the organization, 53% of the respondents agreed with this statement, 29% were neutral and did choose either side only 8% disagreed with this statement. Though it is emerging concept, most of the HR professionals are not able to differentiate both scenarios.

Most of the organizations are moving towards HR outsourcing, 83% respondents agreed it means they have realized the value of the HR outsourcing. Really it is beneficial for the organizations and this is the key success factor for the organizations.

Data Validity and Reliability

For the collection of data questionnaire was used which was designed according to hypothesis, and nature of information we wanted to ask. All questions were designed in such direction which gave us proper direction towards hypothesis. Secondly, this questionnaire was initially passed through pilot testing process in which any types of problems or errors and unnecessary things were removed that verified authenticity of that questionnaire. Thirdly, this questionnaire was filled by HR professional and they know very well about related field, they were experts and have extensive ideas regarding this field and they responded to the questions based on their deep knowledge and vast experience. As we discussed earlier in this research those respondents were asked to participate who had been working in the organizations for more than five years and they had captured a leading position in their particular department. They were also working in the world class organization,so scope of these people was very high their participation in this research gave me a clear picture to draw a better conclusion.

Ethical Issues

Apart from many issues it is also mandatory for the researcher to take care of ethical issues related with that particular research. As questionnaire that were received from the respondents having confidential data that was unethical to disclose because they provided some personal information and it seemed awkward to deliberately convey others and it also seemed unnecessary that it should be told to any one. All the facts and figures provided by the respondents especially most secrete things were kept as secrete only required thing that were mandatory to analyze has been discussed in this research. One more thing that what ever the result of this research, organizations which use the data for their betterment purpose must take care of one thing that they would not harm their employees.


In the view of above research it has been recommended to the organizations that HR outsourcing is very important aspect that must be focused. By implementing HR outsourcing most of the organizations availing the benefits of it and others are trying to implement. Few of the organization have not taken any effort to move in this direction. Though the world of business is very dynamic and it is changing rapidly, it has been hard for the most of the organizations to operate in this dynamic world. On each day new products have been introduced in the market and new ideas have been brought in the market. Competition is increasing day by day; every organization is trying to take over other. Businesses are facing very tough competition and it is very hard to respond these daily fluctuations. For the sake of survival, organizations must critically analyze the situation and plan to responds these changes accordingly. If any organization does not take care and it is not worry about what ever is happening in the business world, they may almost go out from the market they do not sustain their competitive positions.

As we know HR is key asset of any organization, all physical assets are operated by human resource. Human resource does not have only capability to operate physical assets but it can also bring new ideas by using its analytical skills. If any organization has capable and competent human resource it has an edge to other organization because it can respond well. Capability is bestowed by nature; it does not mean if any one is highly qualified he is capable as well. Any organization that has hired talented human resource it can respond well to the changes occurring in the dynamic business world.

HR outsourcing is an emerging concept; most of the organizations have adopted this concept in which organizations get their HR functions done externally. It the light of my research it is strongly recommended that organization must focus to bring changes because it assists them to attain competitive advantage. Those organizations which have not yet considered this fact must focus on it. It would not only save the cost of the organization but it also would help to render the services of highly competent HR professional.

As we all know that business world is very dynamic, each day we find new changes in the market. Organizations are striving to introduce innovative and modified products. With the passage of time, necessities of the people have also changed. In order to produce products, offer service according to expectation of customers, organization must hire those people who must be committed and enthusiastic with the organization. So they must go for HR outsourcing for the betterment of their services and to respond the rapidly changes in the market.


Organization get their human resource function done out side the organization is known as HR outsourcing. With the help of HR outsourcing organization hand over its human resource issues to be resolved by the third party and that third solves all issues related to human resource.

With detailed analysis of this research, I have come to this point that HR outsourcing is mandatory for the organizations and gives competitive advantage to the organizations. Finding of this research confirms that though HR outsourcing organizations attain competitive advantage. In this research, respondents who participated were all professional and performing their duties in the leading organizations. Most of the respondents uttered that human resource department plays a vital role in the development of the organizations and really this is the fact because they are the key assets of any organization. All those organization that captured leading positions in the world market, it was due to their expert human resource.

In the regard of question whether HR outsourcing is important, many of the respondents positively uttered that it is mandatory and plays most important part in the development of any organization. Because now a days business people know the fact that it is hard to survive in the market until timely actions are not taken. So it can only be possible when they get their HR functions done in professional ways. There would be dual effect of this HR outsourcing, one organization would avail professional guidance at low cost and secondly due to professional capabilities they would try to motivate employees.

HR outsourcing increases the work efficiently of the organizations. Productivity of the organizations increases, in view of few questions it was stated that due to competent HR organizations gives better results and perform at expected level. Most of the organizations are now moving to HR outsourcing, there can many reasons behind that. One reason among them can be the tough competition in the market due to that organization has to respond to rapidly changing market. Every day new and improved products or services have been introduced, it has become complex to run the businesses if proper attention is not paid, it has also become matter of survival for the organization that's why efforts are continuously made to bring organization at competition level. Organizations are striving to make changes on daily basis and respond to the external environment accordingly. It is their full effort to pave the way of success. Focus towards HR outsourcing is also one of the parts of this connection.

In nut shell, I conclude that organizations attain competitive advantage due to HR outsourcing;they perform better than other organization, and they become successful to attain competitive advantage because they respond the environment quickly if any new change occurs out side the external environment. It increases the productivity of the organizations and they become more efficient. Most of the organizations are now moving towards HR outsourcing because they have realized the importance of HR outsourcing.


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