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IMPACT OF AN EFFECTIVE HR SOURCING STRATEGY ON ORGANIZATIONAL PERFORMANCE

The organizations apply to outsourcing for empowering core competencies. Barney (1991) has stated that sustainable competitive advantage can be consider as a result of possessing immovable resources that permit clear product or service differentiation. However, all resources are not possessed the potential to be a source of sustainable competitive advantage of the firm. Barney (1991) also suggested that for a resource to have that potential, it must satisfy four conditions: be valuable, rare, imperfectly imitable and non-substitutable. With the increasing globalization, outsourcing has become an important business approach, and a competitive advantage may be gained as products or services are produced more effectively and efficiently by outside suppliers (Yang, et. al. 2007; McIvor, 2008). Outsourcing allows firms to focus on their own core competences by relocating limited resources to strengthen their core product or service (Lee and Kim, 2010). The traditional outsourcing emphasis on tactical benefits like cost reduction (for example, cheaper labor cost in low-cost countries); have more recently been replaced by productivity, flexibility, speed and innovation in developing business applications, and access to new technologies and skills (Elmuti, 2004; Gilley, et.al. 2004). In order to gain competitive advantage they must select areas in which they will concentrate their resources (Hamel and Prahalad, 1994).

By outsourcing to specialist organizations services not generated by core competences, companies can see an improvement in their organizational performance. Gilley and Rasheed (2000) have stated that there are three reasons for this. Firstly, the acquisition of non-strategic services allows the organization to center on what it really can do well, that is, on the services whose resources have a high strategic value (Gilley, et. al. 2004). Such a focusing on services not included in the core competences can increase performance and allow the company to be more flexible. Secondly, increasing the outsourcing of non-strategic services can improve both the quality and the service. Lastly, the outsourcing of services of low strategic value enables the company to reduce costs and improve its competitive position (Gilley and Rasheed, 2000; Espino-Rodriguez and Robaina 2004).

Also worthy of note is the fact that present day outsourcing is no more limited to peripheral activities such as cleaning, catering and security.  Outsourcing also includes critical areas such as design, manufacturing, marketing, distribution, information system etc. Not only the large scale organizations but also small and medium scale enterprises outsource. They have over the years embarked on outsourcing strategies such as back office activities (such as security services, cleaning services, order processing, others); primary activities (manufacturing, purchases, warehousing, sales force, customer service, others); accounting activities (such as financial reporting, tax processing, others) and support activities (legal services shipping/ transportation, IT services/system, training, others). These outsourcing activities have over the years led to their increase in profitability (John, 2017).

Studies have shown that the relationship between outsourcing human resourcing functions and organizational performance is positively correlated. benefits can be concluded in cost reduction, more concentration of strategic or core issues, reduced risks, more flexibility, efficiency increase, guarantee the access to the latest technologies. The decision to outsource is not random and usually managers decide to outsource because of one of the six reasons as follows; financial savings, strategic focus, access to advanced technology, improved level of service, access to expertise, and organizational policy. Literature has shown that outsourcing HR functions has a key role in the improvement of organizational performance which can be characterized in three major dimensions; productivity, profitability, and cost efficiency (Alzhrani, 2020).

 

Reference:

Cicek, I. (2011) The effect of outsourcing human resorces on organizational performanve. International journal of business and management studies, Vol 3(No 2) 1309-8047. Available from  https://www.researchgate.net/publication/330521241_THE_EFFECT_OF_OUTSOURCING_HUMAN_RESOURCE_ON_ORGANIZATIONAL_PERFORMANCE_THE_ROLE_OF_ORGANIZATIONAL_CULTURE?enrichId=rgreq-5f2409e9072eb7baa0d5db08798496eb-XXX&enrichSource=Y292ZXJQYWdlOzMzMDUyMTI0MTtBUzo3MTc1MTUxMzA5NTc4MjVAMTU0ODA4MDM0Njc1NA%3D%3D&el=1_x_3&_esc=publicationCoverPdf [Access on 18th April 2022].

Barney, J. (1991) Firm Resources and Sustained Competitive Advantage. Journal of Management, Vol.17. Available from https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwiAgvjchp33AhVMzDgGHQeRCHgQgAMoAHoECAIQAg&url=https%3A%2F%2Fscholar.google.com%2Fscholar_url%3Furl%3Dhttps%3A%2F%2Fwww.academia.edu%2Fdownload%2F35036864%2FJournal_of_Management-1991-Barney-99-120.pdf%26hl%3Den%26sa%3DX%26ei%3DTw5dYqWfM86E6rQPz8uiuAc%26scisig%3DAAGBfm0Wlhqsr_RM7huL6gjPhCtrrKApnw%26oi%3Dscholarr&usg=AOvVaw25J4mPDCT_mP_ItoPZiooc [Access on 18th April 2022].

McIvor, R. (2008) “What is the right outsourcing strategy for your process?”. European Management Journal, Vol. 26, pp.24-34. Available from  https://ideas.repec.org/a/eee/eurman/v26y2008i1p24-34.html [Access on 18th April 2022].       

Yang, D. H., Seongcheol, K., Changi N. and Ja-Won, M. (2007) “Developing a decision model for business process out sourcing”. Computers & Operations Research, Vol. 34, pp. 3769 – 3778.  Available from    https://www.sciencedirect.com/science/article/abs/pii/S0305054806000335 [Access on 18th April 2022].         

Lee, R. P., Kim, D. (2010) “Implications of service processes outsourcing on firm value. Industrial Marketing Management”, Vol. 39, pp.853-861. Available from https://www.sciencedirect.com/science/article/pii/S0019850110000039 [Access on 18th April 2022].

Elmuti, D. (2004) “The Perceived Impact of Outsourcing on Organizational Performance”.  American Journal of Business, Vol. 18 (No. 2) pp.33-42. Available from https://www.emerald.com/insight/content/doi/10.1108/19355181200300010/full/html [Access on 18th April 2022].

Gilley, K. M., Charles, R.G. and Abdul, A.R. (2004) “Human resource outsourcing and organizational performance in manufacturing firms”. Journal of Business Research, Vol. 57, pp.232-240. Available from https://www.researchgate.net/publication/4966991_Human_Resource_Outsourcing_and_Organizational_Performance_in_Manufacturing_Firms[Access on 18th April 2022].

Hamel, G. and  Prahalad, C.K. (1994) Competing for the future. [online]  Boston: Harvard Business School Press. Available from https://hbr.org/1994/07/competing-for-the-future [Access on 18th April 2022].

Gilley, K. M. and Rasheed, A.A. (2000) “Making more by doing less: analysis of outsourcing and its effects on firm performance”. INTERNATIONAL JOURNAL OF BUSINESS AND MANAGEMENT STUDIE,Vol. 26( No. 4) pp.763–790. Available from  https://dergipark.org.tr/en/download/article-file/255950 [Access on 18th April 2022].

Rodriguez, E., Tomas, F. and Robaina, V.P. (2004) “Outsourcing and its impact on operational objectives and performance: a study of hotels in the Canary Islands”. International Journal of Hospitality Management, Vol. 23, pp.287-306. Available from https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwjCkdSK08L3AhXfSWwGHVnHAAYQFnoECAIQAQ&url=https%3A%2F%2Fwww.academia.edu%2F64588265%2FOutsourcing_and_its_impact_on_operational_objectives_and_performance_a_study_of_hotels_in_the_Canary_Islands&usg=AOvVaw1KF7rNFbikTfYzSQFqdeeW [Access on 18th April 2022].

John, I. A., Anza, N.C. & Iyortsuun, A.S. (2017) Effect of outsourcing strategies on the performance of small and medium scale enterprises (SMEs). Journal of Global Entrepreneurship, vol 7 (Article number: 26). Available from http://dx.doi.org/10.1186/s40497-017-0084-0 [Access on 18th April 2022].

Alzhrani, A.M. (2020) A Administration and Management. Global Journal of Management and Business Research. Volume 20.

Comments

  1. P.Janaka Chaminda PereraApril 19, 2022 at 6:36 AM

    Benefits & difficulties of expending PCNs
    Benefits
    • Association resistor and direction are sustained & enabled.
    • Favorable leaders are openhanded universal familiarity.
    • PCNs could be the greatest persons for the occupation since of their unusual talents & capabilities.
    • There is a guarantee that the supplementary will observe MNE Goals, Guidelines, etc.

    Disadvantage
    • The positive prospects of HCNs are narrow.
    • Revision to the mass motherland can yield an extended period.
    • PCNs might execute an Incorrect HQ stylishness.
    • Reparation for PCNs & HCNs might be different.

    References
    Dowling, P. M. F. &. A. D. E. S., 2021. https://dokumen.tip. [Online]
    Available at: https://dokumen.tips/documents/sourcing-hr-for-global-markets-staffing-recruitment-selection.html
    [Accessed 19 04 2022].

    ReplyDelete
  2. Kasun WarnapuraMay 5, 2022 at 3:02 PM

    The human resource departments are developing new strategies that would ensure the most competent employees are selected in the organization. Other practices like training and motivation are also useful in improving the competence and satisfaction of the employees.Human Resource Management is the combination of the practices that would ensure the development of the people in the organization to help the organization gain a competitive advantage.

    (Alzoubi,2019)

    ReplyDelete

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