An exploration of outsourced HR activities
and motivations in the Dutch market.
MSc Thesis
Executive Programme in Management Studies – Strategy track
By Joyce Haamans
Amsterdam Business School, University of Amsterdam Noordwijk, 31 January 2016
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Table of contents
Table of contents ... 1 Abstract ... 3 1. Introduction ... 4 2. Theoretical background ... 7 2.1 Outsourcing in general ... 7 2.1.1 Motivations to outsource ... 8 2.2 HR-outsourcing ... 10 2.2.1 Definition of HR-outsourcing ... 12 2.2.2 HR outsourced activities ... 13 2.2.3 HR activities categorized ... 152.2.4 Motivations to outsource HR activities ... 19
2.2.5 Decisions in HR-outsourcing ... 22 3. Method ... 23 3.1 Research Design ... 23 3.2 Sampling ... 24 3.3 Data collection ... 27 3.4 Analysis ... 28 4. Results ... 30
4.1 Company details and HR... 30
4.2 Outsourced activities ... 30
4.2.1 Categories ... 32
4.3 Core and not-core HR activities ... 33
4.3.1 Core and not-core outsourced activities ... 33
4.3.2 Core and not-core not-outsourced activities ... 34
4.4 Motivations ... 36
4.4.1 Motivations per outsourced activity ... 38
5. Discussion ... 45
5.1 Propositions and explanation building ... 45
5.1.2 Outsourced activities ... 45
5.1.2.1 Categories ... 47
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5.1.2.2.2 Transformational activities ... 49
5.1.2.3.3 Traditional activities ... 50
5.2 Core and not-core outsourced activities ... 54
5.3 Motivations ... 55
5.3.1 Cost reduction ... 55
5.3.2 Expertise... 56
5.3.3 Focus on core activities ... 56
5.4 Implications for research question ... 57
5.5 Additional findings ... 59
6. Conclusions ... 60
6.1 Limitations and implications for further research ... 61
7. References ... 63
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Abstract
Since the1980’s, outsourcing appeared and developed to a popular strategy for organizations. The fastest-growing segment in outsourcing has showed to be Human Resources (HR). This research studied the questions which types of HR activities are being outsourced and which motives applied in HR-outsourcing decisions.
Which HR activities are outsourced and which motivations lead to an outsourcing decision, differ from organization to organization. Whether activities are seen as core for an organization, by which is meant that they add (strategic) value for an organization, has an influence on the probability to outsource an activity according to the literature.
The outsourced HR-activities and motives in this decisions were investigated by a case study at 11 Dutch organizations by conduction interviews. In this exploratory research, the results showed the same variance in the motivations to outsource, as the studied literature showed. Of the 11 researched organizations, 10 organizations currently outsourced 1 or more HR-activities.
In total 22 activities are outsourced, which can be divided in 9 different types of activities. The most found outsourced activity is payroll, followed by lease. The type of HR activities that are outsourced, are almost exclusively not-core activities. In most of the outsourcing decisions, more than 1 motivation was mentioned. The most found motives are cost reduction, expertise and focus on core activities. Further research is interesting to explore if there are relationships between outsourced activities and
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1. Introduction
In the 1980’s, outsourcing appeared as a new strategy for organizations (Hätönen, 2009). In the 1990’s outsourcing became even more popular and was even noticed as 1 of the greatest management ideas in the Harvard Business Review (Jiang, 2006). Since then, a (r)evolution of the outsourcing practice is visible, and even though this phenomenon is far from new, according to Corbett (2004), it has sky rocked in recent years.
Outsourcing is a highly strategic decision that has the potential to cause ripple-effects throughout the entire organization (Gilley, 2000). Outsourcing exists when an external provider supplies products or services to an organization (Kotabe, 1992; Belcourt, 2006). By outsourcing, financial advantages can be achieved (Quinn, 1992; Kotabe, 1989) and outsourcing can lead to higher-quality goods and services (Kotabe & Murray, 1990). In different disciples this new strategy appeared and was found in the field of HR since then.
Organizations outsource activities in an attempt to enhance their competitiveness (Gilley, 2000). Because HR practices are strategic, they influence company performance and competitiveness (Noe, Hollenbeck, Gerhart, & Wright, 2012). HR practices are important because employees are seen as the most important assets for companies as found in many corporate annual reports (Barney & Wright, 1997) which confirms the competitive advantage that can be gained from HR.
Human resources “refers to the policies, practices and systems that influence employees’ behavior, attitudes and performance” (Noe et al., 2012). The literature identified different reasons to outsource HR activities. For example cost-based reasons such as to reduce HR overhead costs and acquiring specialized HR capabilities (Greer, 1999) and focusing on core functions (Beaumont & Sohal, 2004). Many research on HR-outsourcing has been done in the late ‘90’s and the early ’00’s. Regardless of the increased popularity of outsourcing in recent years, previous research on outsourcing has been primarily
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theoretical in nature (Gilley, 2000). Therefore, many unanswered questions remain (Alewell, Hauff, Thommes, & Weiland, 2009).
One of those questions is about the factors that triggers outsourcing decision processes which are completely neglected in many research (Alewell, Hauff, Thommes, & Weiland, 2009). This led to their research ‘Triggers of HR outsourcing decisions – an empirical analysis of German firms’. Additionally, besides the research of Alewell et al. (2009) that was focused on German firms, Klaas et al. (2008) researched HR-outsourcing specific in North American firms. A third found country specific research about HR-outsourcing was found by Susomrith and Brown (2012) who studied HR-outsourcing in Australian organizations. Nevertheless, similar research has never been conducted with a focus on Dutch organizations.
The International Data Corporation researched HR-outsourcing in the Dutch market in 2013 (Financieel-Management.nl, 2013). They found that 63% of the organizations that participated in their research outsourced a part of their HR processes and 37% considerate to outsource. No recent studies have been found on HR-outsourcing that focuses on the Dutch market.
As a result, it is interesting to study the motivations that lead to outsourcing decisions and the activities that are being outsourced in Dutch organizations. Therefore my research question is:“Given that there are differences in motives to outsource generally, which outsourcing motives apply to HR-outsourcing decisions in Dutch organizations? Which types of HR activities are being outsourced and are both core and not-core HR activities outsourced?”
To answer this question, I explored which HR-activities are being outsourced (sub question 1). By categorizing all HR categories, they can be compared to the literature to see if there is support found about which types of HR activities are outsourced. There may be a difference in which activities are outsourced and therefore this study researched which activities are core and not-core (sub question 2).
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What the motivations are behind HR-outsourcing decisions (sub question 3) can vary (Greer, 1999; Beaumont & Sohal, 2004), but has not yet been examined in HR-outsourcing decisions in the Dutch market. To study which motivations led to those decisions and which activities are being outsourced I conducted exploratory research in which I selected the Dutch market as the case study to discover why organizations opt for HR-outsourcing nowadays.
In total 11 HR Directors/Managers in 11 different organizations are interviewed that both outsource or do not outsource HR activities. Because this group contains 10 people that are ultimately responsible for the HR department, motivations in outsourcing decisions were explained and the type of outsourced HR activities that are outsourced became clear. This led to interesting results that are found in this study.
Statement of Originality
This document is written by student Joyce Haamans who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
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2. Theoretical background
The theoretical background in this study leads to propositions. The propositions are further studied by use of the collected data. An overview of the propositions is found in the next chapter.
2.1 Outsourcing in general
Outsourcing is a relatively new strategy that became widely adopted in organizations in the 1980’s (Hätönen, 2009). It occurred as “a tool to make organizations more efficient economic units for profit maximization” (Hätönen, 2009). For example, IBM used to create their computers with their own central processing units, including IBM operating systems. Nowadays, IBM computers are sold with Intel processing units, including Microsoft operating systems.
The originally self-produced computers of IBM changed to computers with parts supplied by
independent suppliers (Kotabe, 1992, p. 103). Outsourcing in its early days was focused on economic efficiency, and changed to a more competence focused approach according to Porter (1996). This ideology of Porter “focus on your core competence and outsource the rest” was gaining popularity in various industries. Today, firms purchase elements of their operations, but according to Grossman (2002), outsourcing means more than just the purchase of raw materials and standardized intermediate goods.
In the 1990’s, outsourcing emerged as a popular operational strategy and was referred to by Harvard Business Review as one of the great management ideas of the past century (Jiang, 2006). Since then, a (r)evolution of the outsourcing practice is visible, and even though this phenomenon is far from new, according to Corbett (2004), it has sky rocketed in recent years.
Outsourcing has many definitions in the business economics literature. For example, Belcourt (2006) states “that outsourcing occurs when an organization contracts with another organization to provide
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services or products of major function or activity. Processes and services that are traditionally done internally, shift to an external provider”. Another definition that is found, for example in Kotabe (1992, p. 103) and Lei & Hitt (1995, p. 836) is defined as third parties that supply components and products.
Gilley and Rasheed (2000) appended another aspect to the definition of outsourcing. They state that “outsourcing is a highly strategic decision that has the potential to cause ripple-effects throughout the entire organization”. Their definition of outsourcing is “the strategic decision to reject the internalization of an activity”. Strategic outsourcing is found in many areas of expertise and, according to Quinn (1999), includes “the relatively permanent purchase of goods or services in a particular category from single or multiple suppliers. It can include techniques from spot buying to strategic alliances”.
2.1.1 Motivations to outsource
Why organizations switch to outsourcing differs from organization to organization. As Gilley and Rasheed (2000) argue; “organizations are increasingly turning to outsourcing in an attempt to enhance their competitiveness”. Quinn (1992) is more specific and proposes that firms can increase their performance by focusing more narrowly on the things they do best by allowing external specialist organizations to concentrate on other tasks. Outsourcing non-core activities allows organizations to increase managerial attention and resource allocation to those tasks that the firm does best (Gilley, 2000).
Besides the advantage of increasing the performance in core competences, Quinn states that outsourcing also achieves financial advantages, which is also concluded by Kotabe (1989). Another motivation to outsource, that received less attention in research, is that outsourcing can lead to ensuring availability of higher-quality goods and services in the future (Kotabe & Murray, 1990). These quality improvements may be realized because organizations can choose suppliers whose products or services are considered to be the best in the world (Quinn, 1992).
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Besides advantages of outsourcing, there are also disadvantages. The costs savings related to
outsourcing may not be as great as they seem, in particular when the external party is foreign. This can result in high transaction costs because of repetitive market-based transactions, especially abroad (Gilley, 2000). In addition, organizations can face longer lead times and complexity in communication and coordination due to outsourcing according to Levy (1995).
More recent studies, for example the research of Harland et al. (2005), confirm that outsourcing can reduce costs and free up assets for organizations. Significant reasons for an outsourcing decision, defined by Harland et al. (2005) are, that outsourcing enables organizations to focus on core activities, reduce costs and provide short-term financial benefits. The decision ‘whether or not to outsource’ requires a decision on which activities can be outsourced and which should remain within the
organization. Harland et al. states that deciding which activities are core and which are not can change and are therefore hard to determine.
Another recent study of Kremic et al. (2006) found three main motives in outsourcing decisions. The first motive is cost driven, returning as a motive in many other literatures as well. Outsourcing is a way to save indirect costs or occurs when suppliers can deliver a service for a lower price (Bers, 1992; Harler, 2000). The second motive they found is strategy driven. This means that outsourcing is part of a strategy to focus on core activities or to be flexible as an organization. Focus on core activities is perhaps the most often cited strategic reason for a strategic decision to outsource activities (Kremic, Icmeli Tukel, & Rom, 2006). The third motive found by Kremic et al. (2006) is a politically-driven motive which is mainly found in public organizations in contrast to the first 2 motives that drive the private industry. “So while cost and strategy may drive private firms, the desire for the general well-being of citizens may drive outsourcing by public organizations.” (Kremic et al., 2006).
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2.2 HR-outsourcing
According to Noe et al. (2012) HR practices are strategic and therefore influence the company performance. In addition, most corporate annual reports state that the most important asset of their company is their employees (Barney & Wright, 1997) confirming the competitive advantage that can be gained from HR. Human resources (HR) “refers to the policies, practices and systems that influence employees’ behavior, attitudes and performance” (Noe et al., 2012). To be more specific, HR activities include analyzing and designing roles and responsibilities, identifying human resource needs (HR planning), attracting potential employees (recruiting), choosing employees (selection), coaching employees and train them for the future (training and development), rewarding employees, (compensation), evaluating their performance (performance management), and creating a positive work environment (employee relations) (Noe et al., 2012).
These HR activities are a sum of activities generally executed by HR departments. Wright et al. (1997), state that HR should fulfill a strategic role that focuses on organization-level performance, the role of an internal business partner in the late nineties. And looking into HR roles, Noe et al. (2012) identified an increase in roles like strategic business partner, change agent and employee advocate, and a decrease in administrative roles. This implies that the field of HR changed from a primarily reactive, administrative function into a strategic function in organizations. Because of this development, it is likely that HR departments focus on activities that have strategic relevance. Routine activities are likely to have less influence on organization strategy and can potentially be organized differently (Klaas B. M., 2001) in comparison to the traditionally in-house performed HR activities that affect front-line human resource decision making which are seen as critical to the development of organizational resources (Klaas B. M., 1999).
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Nowadays important HR activities are organized in three different models according to Noe et al. (2012) in order to execute HR activities in an efficient way. First, the activities are conducted within a shared service model which is an internal expertise center that focuses companywide on HR tasks. Employee service is the second model found, to decrease the administrative tasks within a HR department by self-servicing by employees. Self-service refers to giving employees online access to information about HR issues and enrolling online in programs and services (Noe et al., 2012). The last model is outsourcing HR activities by contracting human resource providers. This consists of activities such as payroll processing and more strategically important processes like recruitment. External parties, like consultants, are brought in to conduct these HR activities.
HR-outsourcing, like outsourcing in general, takes place when an organization contracts an HR vendor to perform HR activities (Greer, 1999). The trend to outsource is growing (Lievens, 2008) and organizations are increasingly relying on outside contractors to perform HR activities. Earlier, Dell (2004) concluded that HR-outsourcing is the fastest-growing segment in outsourcing. Why the trend to outsource HR activities is growing, and which motivations lead to this decision, may differ depending on the outsourced activity (Susomrith, 2012).
Reasons to outsource HR activities that are identified in the literature are for example cost-based reasons such as to reduce HR overhead costs and acquiring specialized HR capabilities (Greer, 1999) and focusing on core functions (Beaumont & Sohal, 2004). Research in the field of HR-outsourcing appeared mainly from the late ‘90’s to the early ’00’s. Nevertheless, as Alewell et al. (2009) concluded, although many research has been done, unanswered questions remain. They state “Factors triggering decision processes related to outsourcing are often completely neglected in existing studies on
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Therefore, Alewell et al. (2009) researched above other things, motivations in outsourcing decisions in German firms. Comparable motivations led to the research of Susomrith and Brown (2012) who researched the questions which HR functions are most often outsourced and which motivations led to the decision to outsource in Australian organizations. A certain research has never been conducted focused on Dutch organizations. Additionally, besides the research of Alewell et al. (2009) that was focused on German firms, Klaas (2008) that researched HR in North American firms and Susomrith and Brown (2012) that studied Australian organizations, no recent studies since then have been found about HR-outsourcing. Specifically, the motivations that lead to HR-outsourcing decisions in Dutch
organizations and the activities that are being outsourced are not being investigated. In addition to complement to the existing literature, my research addresses these questions.
2.2.1 Definition of HR-outsourcing
What outsourcing exactly means is defined in a variety of ways. A clear explanation is found by Belcourt (2006) who stated “outsourcing refers to a contractual relationship for the provision of business services by an external provider“. Because outsourcing can be explained in different ways, it is important to develop a definition of HR-outsourcing to maintain a uniform understanding about when outsourcing occurs.
A reason to emphasize the importance of a clear definition is that some HR activities have always been performed by external suppliers. For example, many organizations hire company doctors from external parties and have never employed company doctors themselves to execute those activities in-house. Therefore, the in-house performance is an important factor because there are activities executed by third parties that have never been performed in-house.
This leads to a definition of outsourcing that contains 2 factors; a. the outsourced activities are performed in-house in the past and b. the HR activities are performed by an external party. One can
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debate whether or not this should be included as outsourcing. To create clarity and consistency
throughout this thesis, the chosen definition of outsourced activities consists a. activities that have been performed in-house in the past and new activities that could be performed in-house but are not. Factor b. contains the existence of an external party that performs HR activities. This is explicitly important because of the existence of shared services centers that are part of an organization but decentralized at a particular department. Those shared service centers are not seen as an external party because they are part of the (global) company.
Those factors together, a. the activities are performed in-house before and b. the factor ‘external party’ leads to the following definition of outsourcing:
“Activities that are traditionally performed in-house and are being executed to a external party
subcontractor at a given time.”
2.2.2 HR outsourced activities
To determinate which HR activities should be outsourced, Cooke et al. (2005) and Oshima et al. (2005) concluded that non-core HR activities should be outsourced and core activities should be retained within a company. Core activities are activities that are crucial for an organizations’ competitive advantage and non-core activities are activities that have a lower impact on the performance of an organization (Cooke F. S., 2005).
When non-core HR activities are outsourced, there will be more focus on activities of a higher value (Porter M. , 1980) which can lead to an overall improved organizational performance (Prahalad, 1990). According to Oshima et al. (2005), a reason to outsource is to focus on the core business, which means focusing on the strategic HR work. He defines strategic work as activities that are integral and
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By outsourcing non-core activities, there will be more opportunity to focus on strategic HR activities. The question that remains is how to decide which HR activities are core and which are non-core (Cooke F. S., 2005). Which activities are core or not, is firm-specific because firms differ in how they operate and compete which influences the criticality of certain HR activities (Lepak D. B., 2005).
According to Cooke et al. (2005, p. 426) “training and payroll appear to be the favorite aspects of HR-outsourcing” followed by recruitment, taxation and legal compliance. Questionable is if training and payroll indeed are less strategic activities or have less opportunity to add value within a firm, as Cook (1999) stated “Can these activities be conducted by third-party vendors?”. The more strategic HR activities stay in the firm, while non-core activities such as traditional or operational HR activities are being outsourced, the greater the opportunity is to create added value for companies (Cook, 1999). This view is also found in more recent research. Susmorith et al. (2012) states that for organizations to remain successful and gain a competitive advantage, organizations should outsource non-core activities that use resources but provide minimum added value. The research of Teng (2007) shows has another view to determine which activities to outsource. Which activities can be outsourced or not, should be based on areas of technical expertise; specialist activities are increasingly outsourced.
As stated earlier, whether or not to outsource, is a strategic decision. The influence on organizations to create added value (Cook, 1999) and gain a competitive advantage (Susomrith, 2012) is from strategic importance. A firm’s decision to internalize or externalize HR activities is likely to be partially driven by factors such as a company’s strategic orientation (Miles R. S., 1984) and from this orientation, decisions about which activities to outsource and which activities to keep are made.
Belcourt (2006) provides a general list containing HR functions that can be outsourced, among which payroll, benefits, training and recruitment and selection. Like outsourcing in general, there are several reasons for firms to outsource their HR activities. The global competitive pressures make that
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organizations are being advised to concentrate on their core activities and capitalize on external parties’ experience (Porter M. , 1990). As part of a constantly changing internal and external environment, each organization is subject to fluctuations in output demand which entails a continuing emphasis on
flexibility, efficiency and responsiveness (Susomrith, 2012).
2.2.3 HR activities categorized
Because it is not clearly defined in literature which HR activities are core and which are non-core, therefore all possible HR activities that could be outsourced are taken into account in this research. In addition, Cooke (2005) states that what are core and non-core aspects of their business are constantly reassessed and the way the activities can be sourced, either in-house or externally, readjusted. To develop a comprehensive model that includes all possible variations in HR practices is a daunting task according to Lepak et al. (2005). Moving up to a higher-level of aggregation and focus on categories of HR practices, rather than specific HR practices, can alleviate this problem. By looking at the overall nature of groups or bundles of HR activities, a more appropriate model of categories can be defined.
Such categories are created by several researchers. Snell et al. (1995) outlined three domains of HR; operational, relational and transformational. They stated that operational HR practices contain day-to-day activities of HR and tend to be administrative in nature. The relational HR activities connects workers to one another and improves the delivery of HR services to workers throughout the firm. Transformational HR activities help organizations to change the way they do business.
According to Lepak et al. (1998), HR activities can be categorized as idiosyncratic, peripheral, traditional or core. Idiosyncratic activities are activities that are unique to an organization but do not directly add value. Peripheral activities are fairly generic and contribute little, if anything to the firm’s
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the traditional activities. Finally, core HR activities are used for achieving strategic benefits for a company and contribute to its success.
The different categories as outlined by Lepak et al. (1998) and Snell et al. can be found in the research of Carrig (1997) and Wright et al. (1997). They formulated 3 other categories; transactional, traditional and transformational. Relating to the operational activities stated by Snell et al. (1995) and idiosyncratic and peripheral stated by Lepac et al. (1998), transactional practices are those most directly related to the administrative component of HR. These transactional practices contain benefits administration, record keeping and employee services (Carrig, 1997). Transactional activities include day-to-day transactions such as pay administration (Klaas B. M., 2001) and are used to manage workers and the work
circumstance and tend to be administrative and serve a supportive role in the operational infrastructure (Lepak D. B., 2005). Carrig (1997) conceptualized traditional HR activities as policy-related practices, such as performance appraisal, training and compensation. Additionally, Wright et al. (1994) explains traditional activities as functions such as performance management, employee learning, recruiting, selection compensation and industrial relations. The third category, transformational activities, are oriented toward contributing to strategic organizational objectives (Carrig, 1997). Wright et al. (1994) explains transformational activities, as activities that create long-term capability and adaptability for organizations. This last category is comparable to Snell’s same called category focusing on change management and the firm’s strategic needs. In practice these categories are not as static by definition, the manner by which HR practices are used determines whether they are traditional, transformational or transactional rather than the practice itself (Lepak D. B., 2005). Nevertheless, these categories give a clear view on the different activities and therefore will be taken into account in this research. Table 1 gives an overview of the three categories, based on the model of Carrig (1997). This overview contains the explanation of transactional activities (Snell et al. 1995; Carrig, 1997; Lepac et al. 1998; Klaas, 2001), traditional activities (Wright et al. 1994; Carrig,1997) and transformational activities (Wright et al. 1994;
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Carrig,1997). Because this categorization contains different studies, it will be used as example to categorize HR activities in the different formulated groups of activities.
table 1
As shown in the table above, transactional activities are most related to an administrative function of HR, which is supported by Wright et al. (1997). Because these activities are low in strategic value, basically routine activities, those activities are uncomplicated to outsource (Susomrith, 2012). To see if there is support found in this study about which types of HR-activities are outsourced as stated by previous research, the 3 categories are researched to see which activities are or are not outsourced. This leads to the first proposition:
1a. Transactional HR activities can be outsourced.
According to Ulrich, core activities are transformational and create value for employees, customers and investors. Building on the theory of Carrig (1997), transformational HR activities are activities that contribute to strategic objectives and therefore can be stated as strategic HR activities. Because these activities “comprise the greatest value for organizations, they are least likely to be outsourced, although external consultants may often be used to assist in these activities” (Susomrith, 2012). This leads to the next proposition:
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If core activities can be seen as transformational and non-core activities can be labeled as transactional, where do traditional activities fit in? As mentioned before, according to Lepak et al. (2005) it depends on how an organization operates and competes to determine which traditional activities are core for a company. Therefore this category cannot be put in a framework that suits all organizations as the traditional activities can be core and non-core, depending on the action, the organization and the purpose of these activities. Because the category transactional activities consist only non-core activities and the category traditional activities consists both core and not-core activities, it is more likely that transactional activities are more outsourced then traditional activities. This leads to the following proposition:
1c. Traditional HR activities are less outsourced then transactional HR activities.
As showed before, core activities are less likely to be outsourced then not-core activities (Susomrith, 2012). To determine which activities are core or non-core, a deeper dive into the literature is needed. Core and not-core activities can be separated according to Finn (1999); Top-level strategy, HR policies and line management responsibilities are seen as core activities whereas specialist activities, routine personnel administration and employment regulations are seen as not-core activities. Ulrich (1998) is more specific and suggest that not-core activities are routine and standard actions that can easily be duplicated and replicated and therefore not-core.
In order to determine which HR activities are outsourced, core and not-core activities need to be determined. This leads to the second sub question:
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2.2.4 Motivations to outsource HR activities
The most commonly outsourced activities noticed by Noe et al. (2012) are payroll, relocation and benefits administration. Interesting is to find possible relations between the outsourced activities and the motives that lead to a certain decision. An outsourcing decision can be influenced by different reasons on both operational and on a strategic level, which is comparable to general outsourcing (Cooke F. S., 2005). Because of tougher competition and downsizing in terms of efficiency and effectiveness, the HR function is increasingly under pressure (Roberts, 2001). This increased pressure can force HR
departments to become more strategic with fewer resources, which Susomrith and Brown (2012) found to be a fundamental reason for HR managers to turn to outsourcing.
As stated before, outsourcing is used to purchase goods or services from a strategic perspective. This perspective should lead to benefits for organizations. A competitive advantage can be achieved by HR-outsourcing because HR services can be better, faster and possibly cheaper when they are outsourced (Jeffay, 1997). Gilley and Rasheed (2000) showed in their research, that the most considered benefits of outsourcing are an improved financial performance and various results such as increased focus on core activities. These motives are abstract and later research added more specific insights to the study of Stroh (2003). This research showed that gaining access to world-class capabilities, improving company focus and benefitting from resources that are not available internally are, alongside to a cost reduction strategy, reasons why companies choose for outsourcing.
Cheaper HR services, improving financial performance and cost saving are other ways to name the most frequently mentioned benefit and in the outsourcing decision; cost reduction. This is also found by Noe et al.; the pressure on costs is a reason that leads to an outsourcing decision. When an outsourcing partner can provide the service more effectively and efficiently this leads to outsourcing decisions (Noe et al., 2012). For example because the external partners are specialists and able to develop extensive
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expertise that can be leveraged across a number of companies. Cooke (2005) and Delmotte and Sels (2008) confirm that cost reduction or cost reduction are typical reasons to outsource HR activities.
Besides cost saving there are other rationales that lead to outsourcing decisions. Cooke (2005) found 2 typical reasons to outsource HR activities by seeking specialist services and expertise; enabling HR to gain a more strategic, specialists role (1), and to concentrate resources to their core business (2). One of these two, to concentrate on the core business, is also found in the study of Delmotte and Sels (2008). They state that besides cost-reduction, HR-outsourcing is a manifestation of a strategic HR focus. This strategic focus is achieved because of outsourcing tactical HR contributions, which generates a stronger focus on core activities (Delmotte, 2008). Their study shows a positive relationship between a strong focus on strategic HR and the number of outsourced activities. This can implicate that the decision to focus on HR as a strategic pillar leads to an increased level of outsourcing not-core HR activities. When operational HR tasks are outsourced and people management is delegated to line managers, more time and resources can be released for strategic HR contributions.
The other motive stated by Cooke (2005), seeking specialist services and expertise, is also found in the research of Stroh (2003), Kakabadse & Kakabadse (2005), Beaumont & Sohal (2004), Lever (1997) and Klaas et al. (1999). Cooke et al. explained that outsourcing enables firms to profit from comparative advantages because of the expertise of the specialized provider. Third parties are able to provide expertise according to Greer (1999) allowing organizations to acquire specialized HR capabilities and up-to-date technologies.
The three stated motives by Cooke (2005) ‘cost saving, focus on core activities and expertise’ are also described by Susomrith and Brown (2012). In their research, they compared different studies conducted from 1999 until 2012 (Woodall et al., 2009; Beaumont and Sohal, 2002; Klaas et al., 1999; Lever, 1997; Kakabadse and Kakabadse, 2002) and found similar motivations in outsourcing decisions in that time
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frame. Their research confirmed that the cost saving motive is a highly important reason to outsource since this motive is found in all the studies that they compared. The motive expertise or resources is found as a motive to outsource in the 3 most recent researches by Beaumont and Shoal, Woodall et al. and Susomrith and Brown, which is the second most identified motive to outsource. The third and main aspect is the motive of resources, which is about outsourcing operational activities to develop a clear focus on areas where an organization has core competitive advantages.
In table 2, an overview is given of the 3 found motivations to outsource, and the studies in which they are studied.
table 2
The literature study shows that there are several motives that influence an outsourcing decision for companies. The most named motives are displayed hereunder and will be leading in this study as main motives for organizations to outsource HR processes. This leads to the following propositions:
3a. The motive ‘cost reduction’ will have a positive influence on the decision to outsource HR activities.
3b. The motive ‘expertise’ will have a positive influence on the decision to outsource HR activities.
3c. The motive ‘focus on core activities’ will have a positive influence on the decision to outsource HR activities.
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2.2.5 Decisions in HR-outsourcing
Like stated above, the HR-outsourcing decision is about the choice which HR activities are being transferred to an external provider. In respect to this, Quinn & Hilmer (1994, p. 43) point out that companies have to concentrate their “own resources on a set of core competencies where it can achieve and provide definable, unique value for customers” and “strategically outsource other activities for which the company has neither a critical strategic need nor specific capabilities”. Considering the distinction between core and non-core activities, the question arises: ‘which HR activities should be outsourced and which should be performed internally?’.
As explained, the HR-outsourcing decision is not only made as a cost-cutting exercise, to focus on core activities or to gain expertise, but also as a strategic tool (Cooke F. S., 2005). As Oates (1998) suggests; the outsourcing decision is a strategic one and is generally taken at a senior level. Alewell et al. (2009) interviewed chief executives and human resource managers about the triggers in HR-outsourcing decisions in their research. They chose to interview chief executives and HR managers because the decision to or not to outsource, is made by them.
Therefore, the same target group is selected for this research. The method chapter contains a further explanation on how the data for this research is collected.
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3. Method
3.1 Research Design
An overall qualitative approach was chosen in conducting a case study in which 11 organizations were examined on which HR activities are being outsourced and the motivations that lead to this decision. To conduct the necessary information, HR Directors and HR Managers were identified and interviewed.This qualitative approach is chosen, because a lot of detailed information is needed from a small number (11) of sources.
The starting point of this research was exploring existing literature and studies to learn more about outsourcing and especially, HR-outsourcing. From that point, the research design was chosen after narrowing down a specific research area within HR-outsourcing. This research started with a deductive approach by clarifying the existing theory (Saunders, 2012) which led to the definition of the research question. Nevertheless, because of my interest in the motivations that are influencing an outsourcing decision specifically in the Dutch market, this study has an exploratory approach. An exploratory research provides insights into, and a fuller understanding of, a specific field (Saunders, 2012). In this study, the field can be seen as the Dutch HR-outsourcing market which is less explored yet.
In this study a particular occurrence in the field of HR-outsourcing is researched. Specifically, 2 different issues are explored within 11 organizations. First the HR activities that are outsourced and second the motivations that influenced the decision to outsource. Possibly, there is a relationship between the activities that are outsourced and the motivations that influence this decision. By a case study, these questions are researched within single settings (Eisenhardt, 1989). Because case studies can be used to provide description (Kidder, 1982), and because the research question refers to “a contemporary phenomenon that can only be studied in its real life environment” (Yin, 2013), performing a case study
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suits this research. This approach enables me “to get a detailed understanding of the context of the research and the activity taking place within the context” (Saunders, 2012).
The research design will be cross-sectional which will, given time frame of 6 months, a ‘snapshot’ of a particular setting (Saunders, 2012). This approach suits this research because the research question requests information about the current outsourced activities and motivations that led to that decision.
3.2 Sampling
The sample is formed by purposive sampling, identifying a set of Dutch organizations with at least 100 employees, forming a heterogeneous sample of organizations. According to Saunders and Lewis (2012), a heterogeneous sample is a sample which has “sufficiently diverse characteristics to provide the maximum variation possible in the data collected”.
The sample contains organizations with at least 100 employees that have an HR department
(outsourced or not). The reason to not include organizations with less than 100 employees is threefold. First, the HR-fte-ratio, the ratio that determines the fulltime equivalent of employees within an HR department per employee, is one HR employee on 75,2 employees in the Netherlands (Hout, 2015). This means, on average, that for organizations with more than 75 employees, there will be hired 1 fte on an HR department. To conduct valuable information for this research, it is needed to conduct the
interviews with HR professionals that are involved in HR-outsourcing decisions. Therefore organizations smaller than 100 employees are excluded because the smaller the organizations, the less expertise there will be found in the HR function. Second, organizations with less than 100 employees can be relatively small sized that, for example, all HR activities are being outsourced. As the scale of smaller companies below 100 is substantially different; for example an organization with a workforce of 5 employees in comparison to 50 employees, need different operationalized HR departments, and so could lead to
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biases. This is because of the lack of external generalizability of organizations with a workforce of 5 employees in comparison to 50 employees.
To explore the perspectives that are leading to an outsourcing decision, different perspectives and motives can be given if there is not an HR executive responsible for this decision. The third motive is therefore, since smaller organizations may do not hire an HR executive, that owners or directors may contain other motivations in outsourcing decisions, which can lead to bias. Without expert knowledge, complete different decisions in the field of HR-outsourcing can be made and therefore the last reason why has been chosen for this size of organizations for this research.
First, 20 HR executives were contacted of my own network which met the conditions as stated before. In total 7 HR executives were selected based on the stated criteria participate in this research. From these respondents, 4 additional respondents were gathered by snowball sampling. As this target group of HR executives is hard to contact, it was hardly possible to be selective in order to create a heterogeneous group that contains different branches and company sizes. Creating a heterogeneous group of
respondents is important because “the aim of all quantitative sampling approaches is to draw a representative sample from the population, so that the results of studying the sample can then be generalized back to the population” (Marshall M. , 1996).
The sampling led to the following list of anonymized organizations displayed in order of the conducted interviews.
26 table 3
This set of organizations is a diversification of different sectors. Not all sectors are represented, but this list contains a various set of organizations, that differentiate in size, number of employees and size of HR department. Also, a combination of Dutch organizations and international organizations that operate in the Netherlands are included. All interviews were focused only on the Dutch offices.
To determine the ideal sample size for this qualitative study, as a starting point, I focused on between 11 and 20 interviews. The amount of interviews needed, depends on the quality of the data and the
amount of useable data obtained (Morse, 2000). In this research I have chosen for in depth questions to gather more information about all activities and motives to gain a high quality of data. Therefore the time needed per interview was longer, but the amount of total conducted interviews was smaller due to the given timeframe for this study.
An appropriate sample size for this study, is the sample size that is needed to adequately answer the research question (Marshall M. , 1996). As the study progressed, new data, categories, themes and explanations emerged from the data. From interview 9, no new information emerged and therefore data saturation emerged (Marshall M. , 1996; Saunders, 2012). Since then, 2 more interviews were
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conducted to be sure that this data saturation was not a coincidence. Those 2 interviews did not led to additional information and therefore the last interview was the eleventh.
3.3 Data collection
The data for this research is conducted by semi-structured interviews. Because of the exploratory nature of this study, and because many detailed information was needed, this approach suits this research. This method allowed to ask the same basis set of questions (appendix 1) to every respondent and to add in depth questions where needed to find out further relevant details (Saunders, 2012). Additional questions about expectations for the future of HR are added to explore further explanations or relationships that may exist. The interviews were conducted face to face because extra information as for example unspoken language was taken into account. This has taken more time than planned, because some of the respondents were located at the other side of the country. Nevertheless, the advantage of conducting the interviews face to face was important in this research because the most respondents I had never met before. To gain trust and have a comfortable setting, I preferred face to face interviews to obtain the best data as possible.
The questions and topics for the interviews are collected by studying literature. By this method, validated questions have been collected and compared which resulted in a list of questions. Most questions about outsourced HR activities and motivations to outsource were open ended in order to let the respondent answer in his/her way. Intentionally, when the respondents were ask to name all possible (core and not-core) activities and motivations, I did not gave them examples of activities. Therefore, all respondents were able to tell their own story within their own words without being forced into a specific direction.
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This approach led to internal validity of the interviews because all respondents were questioned in the same way. Additionally, because the data collection method was accurately executed in an identical way in all interviews. The result of this approach can lead to a dataset that is not external generalizable because the content is not exhaustive. This will be further discussed in the discussion.
All interviews were conducted between the 1st of November and the 11th of December 2015 after a pilot test. All interviews were conducted in Dutch and got recorded. The chosen interview strategy led to a difference in the duration of the interviews which lasted between 45 and 90 minutes. Because of the sensitivity of some of the organizations (e.g. listed), and in order to secure that the interviewees felt free to discuss every relevant item, the organizations are anonymized and the quotes are not traceable into a specific interview. For the same reason, the transcripts of the interviews are not published with the thesis.
The respondents received the research questions prior to the interviews. This made it possible for the respondents to think about the subject so that there will be less chance on ad hoc answers. Each interview started with an explanation of the research approach, and explained the applied definition of outsourcing in this research.
3.4 Analysis
After conducting the interviews, all interviews have been transcribed and the data had been analyzed. The coding of the transcripts and analyzing the data has been done by using MAZQDA 12. Miles and Huberman (1984) consider 3 current flows in analyzing data. The first step is data reduction (1). This step is a process of selecting, focusing, simplifying, abstracting and transforming the raw data.
O’Dwyer (2004) describes 3 sub-steps within this step of data reduction: general overview, recording initial themes and the reflection phase. By listening to the separate recordings after transcription,
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developing an intuitive open coding scheme, searching for additional codes and reflecting on the findings, these steps were followed. By this step of data reduction, the analysis is sharpened, sorted and organized. This led to a first draft of a category structure with codes and led to patterns that refer to preliminary propositions. Also new patterns emerged and are translated in propositions. From this deductive starting point, all interviews have been coded, also new codes emerged and were inductively added to the coding structure. This structure led to insights in possible relations between variables in this explanatory research (Saunders et al., 2007, p.140). After 4 interviews, axial coding (Corbin, 1990) followed and the codes were rescheduled and some were categorized.
The next step of analyzing followed, selective coding, which showed patterns and relationships and led to different themes within the data (Corbin, 1990). This step is the second concurrent flow according to Miles and Huberman (2) (1984); data display. Displaying the data in a structured overview and deciding which data should be entered, created structure and led to the next step. By creating mind maps and by collapsing open codes to core codes and reformulating the core codes, a representative display was created (O'Dwyer, 2004).
The third and last step of Miles and Huberman (1984) took place. Meaning was derived (3) from the displayed and structured data, in the form of patterns, explanations and final propositions. This last step is broken up in 5 sub steps by O’Dwyer (2004). Without going to deeply into those 5 steps, attention was payed to review the mind maps and transcripts, the creation of a big picture of the story outline of the interviews and the outlying perspectives are collated. Then a rough description of findings was written followed by contextualizing the thick description. The last step, employing the analytical lens helped to prevent selectivity in the data.
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4. Results
The results after the analysis of the data gathered from the semi-structured interviews is given below. First, the found outsourced activities are outlined. Then, those activities are categorized in either transactional, transformational or traditional HR activities. The results about the HR activities that are labeled as core and not-core are described next and are followed by the motivations that have led to those outsourcing decisions are indicated. Finally, all motivations per outsourced activity are described with a further explanation of the outsourced activities.
It is important to mention again that outsourcing in this study is based on the definition of outsourcing that exist of 2 main factors: (a) the activities are performed in house before and (b) the activities are performed by an external party. This is important to realize because otherwise obvious HR activities that are performed in many organizations by external parties (but were never executed in-house), do not appear in this result section.
4.1 Company details and HR
All of the companies employed in the study are located in the Netherlands and have a separated internal HR department. The participants in this study were, with the exception of 1, all ultimately responsible for the HR department in the researched organizations. The HR activities deployed in the various HR departments differ because of company size, industry and HR department design. The research approach, in order to conduct the interviews, led to a diversity in branches as depicted in table 3.
4.2 Outsourced activities
From the 11 organizations that have been interviewed, 10 of these organizations had outsourced at least 1 HR activity. The organization that had not outsourced any HR activity, is 1 of the smallest interviewed organizations with relatively the smallest HR department. In the past, this organization
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outsourced payroll, and because of a switch to another personnel administration system, their payroll had been insourced because the new system was very easy to use.
‘Exact has a very user-friendly salary-package which works well by now and is linked to our own personnel administration system. Even mutations are processed through this system, so to make a payroll run we only have to push a couple of buttons.’
Because of this new user friendly system, the need to outsource this process disappeared and so this process remains in house nowadays.
Of the other organizations that do outsource HR activities, none of the organizations have outsourced the HR department completely. In a few cases complete processes were outsourced. In other cases only parts of processes, activities are outsourced. Because of this difference both will be named activities because a process is a sum of activities. All outsourced activities are further explained in section 5.4.1.
In total, 22 HR activities are outsourced in 10 organizations. In 3 organizations, only 1 HR activity is being outsourced, the rest of the organizations outsourced more activities. Those 22 activities can be
categorized in 9 different activities. All 22 outsourced activities are different in detail because of the way the processes are organized due to for example company size, sector and HR department. An overview of all outsourced activities is depicted in table 4.
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The most outsourced activity is payroll, followed by lease. Substantially less outsourced activities are administration of international employees, administration, exit, lease-contracting, recruitment and sick leave. As showed, there are 2 different types of administration depicted. This difference is important because international employee administration is not in all organizations been executed because not all companies work with international employees. In addition, the organizations that outsourced
administration for international employees did not outsource their regular HR administration.
Therefore, and to be able to see if there is a difference in outsourcing motivations for those 2 apparent similar but different activities, it is important to differentiate those activities.
4.2.1 Categories
Based on the theory of Carrig (1997), HR activities can be categorized in either transactional, traditional or transformational activities. In order to be able to conclude if there is support for proposition 1a, 1b and 1c in this section the outsourced activities are therefore labeled in 1 of those categories.
To start with both administration activities, those activities can be labeled as transactional activities as shown in the table based on the theory of Carrig (table 1). The same is true for payroll. Exit processes are about employee relations and labor because exit processes contain contracting and therefore contract termination can be seen as a similar employee labor activity. Lease is a labor condition, therefore a traditional activity. Lease-contracting is hard to plot in 1 of the categories. Because contracting is not about adding strategic value or long-term capability and adaptability (transformational) (Wright, McMahon, & Williams, 1994), and it is also not a purely administrative day-to-day function (transactional) (Klaas B. M., 2001), this activity will be labeled as traditional. Pension advise is not mentioned in table 1. This activity is about the advice that is given to organizations about pension plans as an employment condition. Therefore pension advice can be compared with conditions as showed in table 1 and therefore a traditional activity. Sick leave is about guiding sick employees which is not a strategic process but goes
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further than a pure transactional process because this process contains more than day-to-day administration. Therefore sick leave is labeled as traditional process. The last found activity is recruitment. As shown in table 1, recruitment is a traditional HR activity.
This leads to the following overview:
table 5
This table makes clear that of all outsourced activities, only transactional and traditional activities are being outsourced.
4.3 Core and not-core HR activities
During the interviews the respondents were asked to mention which HR activities are core or not-core in their organization. Both for outsourced and not outsourced activities. First, all outsourced activities are presented in which they were called core or not-core, then all not outsourced HR activities that are all called core or not-core are showed.
4.3.1 Core and not-core outsourced activities
All outsourced activities are being questioned in the interviews whether or not they are core activities. Of all 9 outsourced activities, 1 is mentioned as core for the organization, recruitment. By core is meant that those activities add value to the organization for the longer term. All other 8 activities are not seen
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as core. Some of them, like administration, is called conditional because that administrative information is needed for strategic goals:
"I consider it to be a core-process and to some extent strategic because it is information that you need for strategic decisions. Without it you are rudderless.”
This example supports the suggestion of study such as Quinn (1992) and Hamel and Prahalad (1994) that firms outsource only organizational practices that are peripheral to support the firm’s competitive efforts. This is contra dictionary to recruitment which is the only core process that is outsourced according to the data.
table 6
As showed in the table above, there is an obvious difference between core and not-core activities. This is obvious because all named core and core outsourced activities, are unanimous called core or not-core, regardless of the interviews. This result shows that, in exception of recruitment, only not-core activities are outsourced.
4.3.2 Core and not-core not-outsourced activities
Above and beyond all outsourced activities, there are HR activities that are not outsourced and therefore not stated in the previous section. For all not-outsourced activities, the respondents were questioned to mention all core and not-core activities. Those activities are shown below in table 7.
35 table 7
HR advice is noticed as core activity with the highest frequency in 6 interviews. Other frequent mentioned core activities are recruitment, strategic planning and policy development.
"Added value, or strategic activities as mentioned, are the policy advisors and recruitment consultants.”
For the same reason, as earlier noted, no example of activities was given to the respondents. Therefore the stated activities vary and probably this list is not complete, however for this purpose this gives a clear overview of the most named activities.
The named core activities are less diverse then the named core activities. The most mentioned not-core activity is administration followed by payroll, lease and sick leave as showed in table 7.
“What happened is that certain reports, so called HR analytics, became standardized and where outsourced to the shared service center in India. This means that we receive periodic reports on headcount, personnel structure, inflow and outflow. They publish these reports monthly for all offices and thus for Amsterdam. "
All stated not-core activities, are activities that are being outsourced. This is regardless the question that is asked: D3. ‘Which HR activities are not outsourced?’ and D3.2. ‘Which of those activities would you
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4.4 Motivations
In total, 9 different motives are mentioned in outsourcing decisions. All motivations are showed in table 8 with exception of 1 outsourced activity, lease, which was not an HR responsibility in that organization and therefore no information could be given about the motivations this decision.
In the table, an overview of all named motivations in the 22 decisions to outsource an HR activity are given.
table 8
Of all described motivations, 2 need further explanation, cost reduction and not-core. The first, cost reduction, is called as a motive in their outsourcing decision by some respondents. Others explained that cost control instead of cost reduction was important in their decision. Both explanations are found in the 9 motives under the label cost reduction. The other motivation, not-core, is mentioned 8 times. By asking the respondents what they mean with this motivation, they explained:
“But we want, I think that is a trend within HR currently, in the end we don’t want to spend our time on administrative activities, but we want to spend our time on activities were we can really add value for the organization.”
With this explanation is meant that when activities are not-core, they can be outsourced which results in more time to focus on core activities and core competences.
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In the total of 22 outsourced activities, 48 motives that led to the outsourcing decision are found. To be more specific and to see possible relations, hereunder a table is showed in which all outsourced
activities are shown per activity, followed by the motivations that were important for that specific outsourced activity. Due to confidential reasons, the table does not contain any information about the organizations, and therefore all outsourced activities are listed per activity.
table 9
As shown in the table, some motivations are mentioned several times for a particular outsourced activity. For most of the outsourced activities, more motivations were named. In 4 of the outsourced activities (3, 11, 15 and 22) only 1 motive is named and in all 17 other outsourced activities, more than 1 motive is found. Number 7, lease, as stated before, is within that organization not an HR responsibility and therefore motivations were not able to conduct.
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This overview in table 9 shows 3 interesting findings. First, the results show that sick leave is outsourced in 3 situations because of lack of expertise. Second, payroll is also in 3 organizations outsourced because of expertise motivations. What these results can imply, is further discussed in the next chapter.
4.4.1 Motivations per outsourced activity
All outsourced activities are further explained and combined with the motives that were named in the outsourcing decisions.
Administration
In 1 organization administration is outsourced. In this organization, 2 different administrative processes are being executed by an external party. The first is registering the length of services of employees and the second is producing management information. Those activities are being outsourced because of efficiency in combination with the fact that those activities were not affecting anyone or any other process or procedure and therefore are not-core. The respondent explained:
“... so by outsourcing tasks you delegate them to partners that are better suited to do the job and can deliver a higher qualitative output. At the same time you free up employee-capacity and resources to focus on activities that deliver added value."
"Employees do not notice the impact it has because it all happens on the background. For this reason it was easy to make the decision to outsource it because it contributes to efficiency."
Additional reasons to outsource these 2 activities were reducing cost and risk. The second process may be discussed whether or not a core activity because of the fact that the interviewee called the result of the HR analytics core for strategic decisions and not-core in its pure administrative function.
39 Exit
The exit process of employees is outsourced by 1 organization. When employees are forced to leave the organization, an external party is engaged to execute this process. The motives that led to this decision where fourfold. First, the work that is needed in this process will not add value for the future of the organization and therefore is not a core activity. Second, this process asks for specific expertise which can be executed by an expert more efficiently with better quality. This process was outsourced primarily because of capacity issues, the third motive, was because the workload that is needed for this process was increased because of a reorganization. Later is decided to remain outsourcing this process:
" ... And because of the experiences we noticed that it actually works effectively that way and is better for the people, creating the opportunity to spend more attention to those people than we could have done if we remained those activities in-house."
The last motivation in this decision is the fact that cost can be reduced when the quality of the process is improved.
Administration - international employees
In 2 organizations, the processes about international employee administration are outsourced. These processes are mainly administrative processes, but ask specific knowledge for international regulations as distinctive activity. These processes contain relocation and immigration processes for expats. Both organizations outsourced these processes because of expertise. For example, 1 of the explanations was:
"With regard to the processes concerning expats, you have the ’four eyes principle’, so people who can challenge each other and really invest in this expertise at an agency."
Another motivation that is mentioned to outsource this activity is efficiency. Because a lack of expertise in this specific field can, for example, lead to a loss of lots of time on finding an answer that a specialized external party can answer much faster.
40 Lease
This process is about all activities needed to arrange lease cars for employees. Leasing is outsourced in 3 organizations. At 1 of these organizations, lease is not a responsibility of the HR department and therefore the motivation to outsource this process could not be discussed for this organization.
Cost reduction is found as a motive in 2 organizations. In both organizations, costs was not meant as saving costs but as costs controlling, as explained:
"It is a combination of cost control, which is different from cost reduction as it is to ensure transparency in costs, and flexibility."
Other motives were found in the fact that lease is not a core activity and therefore can be executed by an external party:
"The motives to outsource these activities are defined by looking into your strengths. This means that you structure the staffing of your department by activities that you find essential to perform yourself. All other activities, the ones you do not find essential to perform yourself and rather give to someone else, with the right expertise and without increasing the expenses, you have to assess to make an outsourcing decision.”
As stated in this quote, expertise is the third motive that is also found in both organizations as motivation to outsource this process. The last found motive to outsource lease is flexibility:
“You consider their added value and question if you are able to create more substantial outcome than an external provider. Or would an outside partner deliver a superior result, while creating flexibility for your own department? This is what matters.”
41 Lease-contracting
Lease-contracting contains management of the lease contracts for organizations. Terms and conditions and costs are monitored by an intermediary external company to guard the prices, costs and risks within the lease contracts. Lease-contracting is outsourced at 1 organization.
Motivations to outsource this process were found in cost controlling and expertise:
“…so they add, next to cost control and maybe even cost reduction, know how, which made us realize okay, for knowledge, know how, we can’t arrange it better.”
You need to deep dive into the subject and only then you notice sub-processes that you find strange because you did not know they exist."
Payroll
Payroll consists the process of salary runs, producing pay slips and all related processes. This process is being outsourced at 6 organizations. Of those organizations, 1 has only outsourced a part of their pay rolling for 1 of the business units and is outsourced only because of expertise reasons. Expertise is also found as a motive in 2 other organizations as explained by 1 respondent:
" They are experts. Off course we have some people who also really know something about
compensation and benefits, but payroll is very complex and can have a complicated construction because of expats, fiscal constructions et cetera. And before you realize it, you blindly trust these experts."
The second found motivation is risk, which is taken into account in 2 organizations.
"This makes the process quite vulnerable. This resulted in the decision not to choose this: we preferred to approach a professional service provider, with a proper team and software at their disposal, used by many others. In order to decrease the amount of risks, due to uncertain factors."
