Outsourcing Workforce Planning
Factors influencing the
decision-making process
Valentijn Reuvers S1922602
Colophon
Title: Outsourcing Workforce Planning
Subtitle: Factors influencing the decision-making process
Principal: Randstad
Diemermere 25 1112 TC Diemen www.randstad.nl
Educational institute: University of Groningen
Faculty of Economics and Business
Master Technology and Operations Management
Post Office Box 72 9700 AB Groningen www.rug.nl
Author: Valentijn Reuvers
j.k.v.reuvers@student.rug.nl valentijnreuvers@gmail.com
Supervisor: Prof. Dr. K.J. Roodbergen k.j.roodbergen@rug.nl
Co-assessor: Prof. Dr. Ir. J.C. Wortman j.c.Wortman@rug.nl
External supervisor: Kevin Retico
kevin.retico@nl.randstad.com
Location: Groningen
Acknowledgements
Abstract
Purpose - An effective workforce planning aims at having the right employee with the right skill at the right place at the right time. This paper aims to explore what factors influence human resource (HR) managers in the process of deciding whether or not to outsource their workforce planning. Design/methodology - Two methods were used in sequence. First, a structured literature review was conducted on literature on the topic of outsourcing of Human Resource activities in order to identify potential factors that may influence the decision-making for outsourcing of workforce plan-ning. For the structure of this literature review a coding tree was used. Second, an empirical study was performed as a multiple case study, gathering data from interviews with the HR managers of three companies who are responsible for making a decision on the outsourcing of their workforce planning. Additionally, after the interviews these HR managers filled out a questionnaire that was used to validate the findings from the interviews.
Findings - A contrast was found between the academic literature and practice. While the more re-cent literature indicates that financial factors are no longer leading decision factors in outsourcing decisions, the interviewed HR managers based their decision mainly on the potential financial be-nefits.
Originality/value - This research is one of the first academic investigations on the outsourcing of workforce planning. It creates a deeper insight into the factors that influence decision-making con-cerning the outsourcing of workforce planning. The presented propositions offer a starting point for continued research in this field, and offer cues for the development of new services in the HR sec-tor.
Keywords – Decision-making, workforce planning, outsourcing, integral workforce planning
1. Introduction
6
1.1 Problem definition
7
2. Literature Review
8
3. Methodology
11
3.1 Research context
12
3.2 Data collection
15
3.2.1 Literature review
15
3.2.2 Interviews
16
3.2.3 Questionnaire
16
3.2.4 Interviewees
17
3.4 Data analysis
17
4. Findings
20
4.1 Findings regarding costs
20
4.2 Findings regarding decision maker
21
4.3 Findings regarding knowledge
22
4.4 Findings regarding quality of vendor
24
5. Discussion
26
6. Conclusion
29
6.1 Research goals
29
6.2 Research methods
29
7. Limitations and further research
32
7.1 Limitations
32
7.2 Further research
32
8. References
34
9. Appendices
38
9.1 Interview Protocol
38
9.2 Quotes interviews
40
9.3 Questionnaire Results
45
1. Introduction
Every day, managers are faced with decisions that will influence their business. They have to care-fully weigh advantages and disadvantages to foresee how their decisions will impact their busi-ness. Many of those decisions are aimed at improving operations to gain or maintain a competitive advantage. Companies need to be flexible to be competitive (Wirojanagud et al.,2007). This flexib-ility helps create an effective buffer against variabflexib-ility in manufacturing systems (Wirojanagud et al., 2007). But it also results in a fluctuating workforce demand (Spronk, 2015). Many companies employ a mixed workforce of permanent workers, temporary workers and freelancers. This mixed workforce helps create the needed flexibility. Managing such a workforce requires collaboration between multiple internal and external parties, such as team managers, Human Resource man-agers and employment agencies.
Managing a workforce is a multi-faceted task. It requires many Human Resource (HR) activities aimed at managing the human capital of an organisation (Oppong, 2017). Typical HR activities in-clude, but are not limited to, administrative tasks such as payroll and benefits administration (Bel-court, 2006), job design, recruitment, retention, performance management and training (Oppong, 2017). An effective workforce planning aims at having the right employee with the right skill at the right place at the right time (Othman, 2012). It is important to have an effective workforce planning, since workforce costs are a large part of the costs for manufacturing companies (Spronk, 2015).
Human Resource activities have traditionally been performed in-house. However, since the middle of the 1990s, there has been a growing trend towards the outsourcing of HR activities (Braun et al., 2010). Nearly all organisations outsource parts of their HR department (Belcourt, 2006). And some observers would even call outsourcing the key trend shaping the future of HR (Braun et al., 2010). The literature on outsourcing HR functions ranges from temporary staffing, payroll, training, recruit-ing and benefits administration (Belcourt, 2006).
The academic literature on workforce planning has not taken this trend towards the outsourcing of workforce planning into account (Spronk, 2015). And at this point, it is unclear why companies de-cide to outsource their workforce planning or dede-cide not to.
This gap in knowledge needs to be addressed to help further develop the outsourcing of workforce planning, and to gain much needed knowledge on sourcing decisions (Lee and Kim, 2010).
Knowing which factors influence the decision-making on the outsourcing of workforce planning will help create an understanding of how decisions concerning the outsourcing of HR functions are made and how they can be improved.
1.1 Problem definition
In this paper, we aim to find the factors that influence the decision-making process regarding the outsourcing of the workforce planning. This is done through two methods. First, a structured liter-ature review is performed on the topic of outsourcing human resource activities. Second, an empir-ical study is performed as a multiple case study, gathering data from interviews with three HR managers responsible for making a decision on the outsourcing of the workforce planning. After the interviews, the managers are asked to fill out a questionnaire to validate the findings from the interviews.
Sub-questions:
1. What relevant literature on factors that influence the decision-making on outsourcing exists? 2. What factors influence the decisions of companies regarding the outsourcing of the workforce planning according to:
- The literature - HR managers
3. Which of the factors play a dominant role in the decision-making process?
2. Literature Review
This chapter introduces some of the fundamental literature underlying this study on the decision-making for outsourcing of workforce planning. In later chapters, the most relevant literature will be analysed using a structured approach, building a coding tree (see Chapters 3 and 4).
Outsourcing refers to contracting a process or function in an organisation to an external firm (Gun-asekaran, 2014). Firms in different industries increasingly consider outsourcing as a strategic op-tion to enhance their core competencies (Xiao, T., et al, 2014). Poor outsourcing practices, how-ever, can lead to unintended loss of operational-level knowledge (Sanders et al., 2007). Authors writing about any kind of outsourcing—global, offshore, business process outsourcing (BPO) or smartsourcing—declare that before selecting an outsourcing opportunity, a company must identify its core competencies and core processes (Boguslauksas and Kvedaraviciene, 2009). Outsourcing can then be seen as the externalisation of non-essential tasks to firms that specialise in performing these tasks to enable a focus on the activities that generate greater added value, thus maximising the implicit potential of these activities (Jiang and Qureshi, 2006).
Companies outsource all kinds of departments of their business, such as maintenance, cleaning, and logistics (Harland., et al). And firms in different industries increasingly consider outsourcing as a strategic option to enhance their core competencies. Jansen and Smit (2012) claim that new areas of outsourcing typically pick up slowly. This hesitation stems from the fact that poorly made outsourcing decisions can lead to a range of problems, like higher costs, disruption of service or even business failure (Cross, 1995). A decision between outsourcing or performing a task in-house will only be made if a company perceives both alternatives as a possible way to solve a problem (Alewell, 2011). Benefits of outsourcing are described in the literature on operations management, innovation, strategic management, purchasing and supply and, in recent years, HR (Feeney et al., 2005).
Workforce planning
Managing a workforce is a multi-faceted task requiring many HR activities (Oppong, 2017). One of those activities is creating a workforce planning. The aim of a workforce planning is having the right employee with the right skill at the right place at the right time (Othman, 2012). Creating a workforce planning consists out of multiple HR activities including training existing workers, plan-ning for hiring new workers, and firing extra workers (Othman, 2012).
why HR outsourcing literature is used for this study. HR outsourcing and workforce planning out-sourcing have a similar effect on the primary processes of a company. This effect is similar be-cause both aim at matching the right worker with the available tasks within a company.
Outsourcing of Human Resource functions
Human resource activities have traditionally been performed in-house (Van den Bergh, 2013). But, there has been a growing trend towards the outsourcing of HR activities, and some observers would even call outsourcing the key trend shaping the future of HR (Braun et al.,). This may be due to the fact that business processes, such as human resource management and payroll, can be separated more easily from a firm's core activities (Lee and Kim, 2010) and are therefore more easily outsourced. Furthermore, HR functions are usually low value, routine activities and, there-fore, can be easily externalised (Sheehan, 2009).
HR functions most commonly outsourced are temporary staffing, payroll, training, recruiting and benefits administration (Belcourt, 2006). Extensive literature is available on HR outsourcing. For example, Vidal and Tigges (2009) state that many manufactures use temporary staff to achieve planned and systematic numerical flexibility. And Cooke et al. (2005) found that contractors are more effective than their clients in recruiting new candidates. This claim is further supported by Shih and Chiang (2007), who found a positive correlation between a firm’s performance and the amount of HR activities the firm outsources, including the recruiting and training activities. Fur-thermore, Dickman and Tyson (2004) state that payroll is, due to its routine administrative tasks, a prime activity to be outsourced.
Outsourcing of workforce planning
In contrast, Jansen and Smit (2012) claim that workforce planning is an HR function which is sel-dom outsourced, and receives little attention in the academic literature. Jansen and Smit (2012) also claim that many organisations believe their workforce planning cannot be outsourced, be-cause it is crucial to achieving a desired profit margin. At the same time, they say that outsourcing of the workforce planning shows great potential to increase the efficiency and effectiveness of the workforce planning. In practice it can be observed that there are companies that have already star-ted to outsource their workforce planning (Inhouse, 2014). Very few analyses, however, have been done of make-or-buy decisions regarding HR functions like workforce planning (Alewell, 2009). Because of this lack of documentation it is insufficiently clear based on which arguments compan-ies make their outsourcing decisions for their workforce planning.
Decision-making on outsourcing
Silvestri, 2008, Kosnik, 2006, Xiao, 2014). This indicates that most companies approach out-sourcing opportunities as a way to reduce costs immediately and significantly (Boguslauksas and Kvedaraviciene, 2008). Other factors that influence companies to outsource HR functions include improved services and access to experts or technology (Belcourt, 2006), lack of capacity or know-ledge (Ruffo et al., 2007), previous outsourcing experiences (Dickman and Tyson, 2004) and high-er quality of shigh-ervices (Xiao, 2014, Kosnik 2006). These factors are supported by Nielsen (2014) who found that companies are starting to view outsourcing as an opportunity to enhance the value of more complex and strategically important organisational processes. This goal can be achieved by the fact that outsourcing is an opportunity to access specialised skills and competences of the vendor (Dickman and Tyson, 2004, Nielsen, 2014).
The shift from short-term considerations to long-term strategic outsourcing might mean that costs become less important, while the other factors named become more important (Lee and Kim, 2010). Gunasekaran et al. (2014) go as far as saying that non-financial factors have become as important as financial factors.
Decision-making on the outsourcing of workforce planning
As no academic literature is available on the outsourcing of workforce planning, little is known about the factors that underlie the decision-making on outsourcing workforce planning. Some state that outsourcing of the workforce planning has a low impact on the workforce (Schripsema, 2016). This low impact would result from the fact that a company taking over the workforce planning merely becomes a facilitator and the outsourcing company remains the deciding party. All rules, regulations and workforce preferences are respected (Schripsema, 2016).
3. Methodology
To answer the research question, two methods were used in sequence. First, a structured literature review was conducted on literature on the topic of outsourcing of Human Resource activities. For the structure of this literature review a coding tree was used. Second, an empirical study was performed as a multiple case study. The five different steps taken in this research are depicted in figure 1.
First, a structured literature review by means of a coding tree (1) is conducted. This review is conducted on the topic of outsourcing human resource activities in order to identify potential factors that may influence the decision-making on outsourcing workforce planning. The insights gained from the structured literature review are used in two ways. First, they are used to generate findings on potential factors that influence the decision-making on HR outsourcing (3). And from those findings propositions (5) on the outsourcing of workforce planning are developed. Second, the insights are used as input for a multiple case study (2). This ensures that possible important factors that influence decision-making on the outsourcing of workforce planning are not overlooked in the multiple case study.
researching the decision-making processes (Nutt, 2011). Additionally, after the interviews the HR managers are asked to fill out a questionnaire that is used to validate the findings from the interviews. The findings (4) from the case study will help further strengthen the propositions developed based on the literature review (5). The mixed methods used are beneficial to answering the complex research question and collect rich data (Yin, 2009).
The unit of analysis of this study, derived from the research question, is the workforce planning of multiple Dutch manufacturing companies. These multiple cases of the outsourcing of the workforce planning offer practical insight into the decision-making processes of HR managers. Furthermore, the use of multiple cases helps provide a stronger base for theory building and explanation (Yin, 2009). The aim of this study is not only to create an understanding of what factors influence decision-making in real life situations, but also to help develop insights that influence the development of new HR outsourcing models, such as the outsourcing of the workforce planning.
The remainder of this chapter is structured as follows: First, the research context is discussed. Next, the data collection methods are presented. Lastly, the data analysis methods are described.
3.1 Research context
The context of this research is provided by Randstad, a global employment agency from the Netherlands. Since 2014, this employment agency has been active in the outsourcing of workforce planning under the name integral workforce planning (IWP). Randstad started IWP in cooperation with Phillips Winterswijk; both companies saw opportunities for further development of the services provided by Randstad (Inhouse, 2014). Randstad provided contacts within companies that are actively involved in a workforce planning outsourcing project and are currently deciding whether or not to implement workforce planning outsourcing, or have already made a decision.
different stages of the decision-making process. The three companies are McCain Lewedorp, Company X and Friesland Campina.
The second reason for selecting these companies is because they are all active in the food sector. Processes and demand tend to be relatively simple in the food manufacturing sector, but they often employ a relatively large temporary workforce (Mr. X). This is why the ability of workforce planning outsourcing to reduce the number of temporary employees and increase efficiency makes it particularly interesting for the food manufacturing sector (Mr. X). To keep the cases comparable and because of the relevance for the sector, we decided to limit this study to the food sector of the manufacturing sector.
McCain Lewedorp
The first company visited is McCain Lewedorp. The interview with McCain Foods is analysed as a case of a company that still has to make a decision about the outsourcing of their workforce plan-ning. McCain Foods just signed a European contract with Randstad for their in-house services. This has resulted in McCain Lewedorp switching from Startpeople (another employment agency) to Randstad. McCain Lewedorp is in the process of building a relationship with Randstad Inhouse Services and has not yet been fully informed of the possibilities of workforce planning outsourcing. The HR manager of McCain Lewedorp, Kornelis Kamerling, was selected as an interviewee, be-cause he will be responsible for making a decision regarding the outsourcing of workforce planning when it is offered by Randstad.
McCain Lewedorp is a manufacturer of frozen potato products, like French fries and potato specialties. Due to the product, the process has a stable demand and prospect; fluctuations in the workforce demand arise mostly from absences and vacations of permanent employees. McCain Lewedorp employs 210 permanent, 15 temporary and 15 stand-by employees. McCain Lewedorp is in the process of building a relationship with Randstad Inhouse Services; because of this new relationship, McCain has been made aware of the possibilities of workforce planning outsourcing. The company is currently waiting for Randstad to take the lead and officially offer workforce planning outsourcing.
Company X
Dutch plants of company X. Company X first learned about workforce planning outsourcing at the end of October. The interview took place towards the end of December. The HR manager was selected to be interviewed because he is the initiator of the workforce planning outsourcing project within this company and will be responsible for deciding whether or not to apply workforce planning outsourcing.
Company X is a V.O.F. active in the potato branch and has 1250 employees, of which 650 work in their production facilities. The company produces chips, sliced potatoes for crisps and other potato products, such as potato powder for Pringles or potato croquettes. This is done in five plants in three countries. Company X has a relatively large pool of temporary workers; the resulting split in the scheduling of permanent and temporary workers results in a lower efficiency than is desirable. Randstad is the supply chain partner for company X, having supplied company X with temporary employees for quite some time. It is due to this well-developed relationship that Randstad offered to take over the workforce planning. Company X has decided to start with an workforce planning outsourcing business case to further assess the potential of the outsourcing of workforce planning for their plants. The potential of workforce planning outsourcing to improve efficiency and thus reduce costs is stimulating company X to start with a business case as soon as possible. However, quality remains more important than speed.
Friesland Campina Maasdam
The second company visited is Friesland Campina Maasdam. The interview at Friesland Campina is analysed as a case where the workforce planning outsourcing offering by Randstad was evaluated and a decision about the implementation of workforce planning outsourcing was made. Since then, in cooperation with a software company, Friesland Campina have started to develop their own software with similar functionalities as offered by Randstad. The software company is only developing the planning software, the planning itself will still be done by Friesland Campina. Paul Ceelen, production manager at Friesland Campina, was interviewed. He is one of the founders of outsourcing workforce planning at Phillips Winterswijk, where he worked as a supply chain coordinator for the planning department, customers and production. He was selected as an interviewee because of his responsibility in making a decision concerning workforce planning outsourcing within Friesland Campina and because of his extensive knowledge of the outsourcing of workforce planning.
permanent workers. The production process itself is relatively stable and most of the demand for temporary workers arises from absences and vacations of permanent workers. Friesland Campina has evaluated the workforce planning outsourcing offering by Randstad and has decided not to outsource their workforce planning to Randstad. Since the decision was made not to outsource the workforce planning, they have started their own similar project with the help of a software development company. The software company is developing software with similar functions as the software Randstad uses. Friesland Campina will use that software to create their own integral workforce planning and will then contact Randstad about which temporary workers they need in a specific period.
3.2 Data collection
The data collection combines a qualitative and a quantitative method and uses a large amount of data sources. A structured literature review and semi-structured interviews were used to gather the required data. A questionnaire was used to further validate the results from the interviews. The remainder of this section discusses the three methods.
3.2.1 Literature review
This research starts with a structured review of the relevant literature on sourcing decisions. The review of the relevant literature is conducted for several reasons. The literature helps provide a starting point for finding factors that influence the decision-making process regarding the outsourcing of workforce planning. It also provides different points of view and thus helps in keeping a broad and open mindset. Furthermore, the relevant literature provides input for the interviews: relevant factors found in the literature are used to formulate the interview questions. If the interviewees do not give a lot of answers, the list of factors from the literature can be used to help the interviewees give their opinion on those factors. This is done to ensure possible relevant factors are not overlooked.
management, (4) outsourcing-decision strategic innovation and (5) make-or-buy decision-making manufacturing. Preference is given to articles written later than 2001.
The search on Web of Science is limited to articles that fall under the following categories: operations research management science, industrial engineering and manufacturing engineering. This is done to limit the search results to articles relevant to the manufacturing sector.
All articles found by using the search terms are presented in the table in Appendix 9.4. By carefully reading all articles, articles that discuss topics relevant for this research were separated from articles that do not. The articles highlighted in green contain one or more relevant quotes for this research. The articles highlighted in red contain no relevant quotes for this research.
3.2.2 Interviews
Semi-structured interviews were chosen as the main source of information to gather the rich data needed for descriptive research. Semi-structured interviews were chosen because these are less constrained then structured interviews or surveys and, more importantly, can lead to new insights and help develop new theory (Karlsson, 2009). To increase reliability, the interviews were guided by an interview protocol; this protocol is given in Appendix 9.1. The first part consists of questions about the interviewee’s role and position within the company. The second part consists of questions regarding the decisions made about workforce planning outsourcing and possible future decisions. Open-ended questions were formulated based on the factors found in the literature. The interview setup leaves room for new questions or factors.
Multiple interviews were conducted to find the relevant decision-making factors. Multiple interviews increase the generalisability of the results (Karlsson, 2009). Three interviews with an average length of 45 minutes were conducted. The interviewees were selected based on their responsibility for the workforce planning and for the possible outsourcing of the workforce planning. Two of the interviewees are HR managers and one is a production manager. Two of the interviews were held face to face at the interviewees workplace and one was conducted over the phone. The reliability of the interviews was ensured by recording and summarising the interviews.
3.2.3 Questionnaire
questionnaire consists of two lists of possible negative and positive factors of workforce planning outsourcing. The interviewees were asked to rank these factors on a scale from 1 to 10. With 1 meaning absolutely no influence on their decisions regarding workforce planning outsourcing and 10 meaning highly influential on their decisions regarding workforce planning outsourcing. This ordinal scale is chosen because it can clearly rank a set of objectives, or in this case, factors (Froberg and Kane, 1988). In the second part, the interviewees were asked to arrange all factors from important to not important; this was done to find possible discrepancies between the positive and negative rankings. The questionnaire and the results can be found in the Appendix 9.3.
3.2.4 Interviewees
Three companies were chosen from a list provided by Randstad. They were chosen based on their current position in their decision-making phase concerning the outsourcing of their workforce planning. The different phases provide the opportunity to research all decision-making factors during the whole decision-making process instead of just analysing the final decision-making factors. The companies that were interviewed are companies in the food manufacturing sector based in the Netherlands and customers of Randstad. Relevant quotes from the interviews can be found in Appendix 9.2.
3.4 Data analysis
Data analysis is the last step in this research. Analysing data is the heart of building theory from case studies, but it is both the most difficult and the least codified part of the process. (Eisenhardt, 1989). The analysis is used to answer the sub-questions. The data from the literature review is placed in a coding tree for organisation and interpretation (Miles et al., 2014). Table 1 shows the output of the coding tree based on Miles et al. (2014). Four main influencing factors were found by using the coding tree. These four main factors form the input for the findings from this study discussed in chapter 4.
The fourth order codes constitute of the main factors that influence decision-making on outsourcing. To be more precise regarding the four main decision factors, every third order code is directly assigned, by interpretation, to one of the four decision factors. This decision is made based on the main decision focus of the category. Table 1 gives an overview of the second and third order codes and the four factors influencing decision-making on outsourcing.
Findings from the interviews are not coded but used as a qualitative second data source. The embedded questionnaires are a quantitative date source and used to validate the findings from the interviews. The results from the interviews and the questionnaire are compared to the results from the coding tree. This is done to achieve a convergence of multiple sources of evidence (Yin, 2009). The convergence of evidence makes it possible to generalise the findings (Eisenhardt, 1989).
Table 1: Overview of codes and main decision factors
Second order code Third order code main factor
Focus on cost Cost reduction Costs
Influence on different kinds of costs Focus on short-term effect
Cost not main decision factor anymore
Upfront costs influence decisions Fixed upfront costs that need to be made
Focus on non-financial factors Intangible benefits
Personal characteristics Decision maker
Former experiences with outsourcing
Lack of knowledge of outsourcing Knowledge of outsourcing Knowledge
Internal skills
Knowing what fits with strategy Knowledge of own strategy
Internal resistance
Strategic fit with skills of vendor
Knowing what your core competence is Knowledge of own processes
Focus on core business
Knowledge of internal alternatives Improving processes
Lack of inhouse expertise
Lack of capacity
Focus on core business improves performance Internal knowledge and stakeholders influence decisions
Outsourcing can be used to motivate staff
Outsourcing can be used to find weaknesses in staff
Strategic fit with skills of vendor Skills of vendor Quality of vendor
Expectations of the skill of the vendor Trust in vendor
Expectation of the quality of the vendor Expectation of the flexibility of the vendor Length of contract influences decisions Former experiences with vendor
Table 1: Overview of codes and main decision factors
4. Findings
The data collected from the literature and interviews resulted in a number of findings that hold significant value for answering the research question. The next four sections show the results of our research. This section is organised by the four main factors from the coding tree that influence the decision-making on HR outsourcing: costs, quality of vendor, knowledge and decision maker. The third level codes from the coding tree are highlighted within the sections. Quotes from the literature in the coding tree and quotes from the interviews form the input for this chapter. The four paragraphs are set up as follows: first, the findings from the coding tree are discussed and second, the findings from the case study are discussed and compared to the findings from the literature.
4.1 Findings regarding costs
Outsourcing is usually an endeavor undertaken to improve and reduce the costs of business processes. For this reason, it is not surprising that most of the literature mentions cost reduction as one of the factors involved in decision-making. Articles up to 2014 unanimously mention cost reduction as the number one reason motivating companies to outsource parts of their non-core business. The factor costs can be divided into three aspects: cost reduction, upfront costs and intangible benefits.
Findings from the coding tree
Cost reduction was found 23 times in the literature sources in the coding tree. Most of the literature agrees that cost reduction is the single most important factor driving decision-making on outsourcing. Some articles however, highlight the dangers of making cost reduction the dominant factor when deciding to outsource HR functions. A focus on cost reduction is a focus on short-term effects (Braun et al., 2010): these can appear to be beneficial in the short run, but create problems in the long run if they lack strategic fit with the company. This focus on fast and easy fixes and fast cost savings is also mentioned as one of the main reasons HR outsourcing often does not achieve the expected results. Nielsen et al. (2014) states that intangible benefits and strategic aspects have become more important than costs. This is exhibited by the fact that companies are outsourcing in the pursuit of external skills and competences instead of cost savings. A shift from cost savings to strategic outsourcing is also found by Xiao et al. (2014) and Gunasekaran et al. (2014). These three more recent articles form a contrast to the older literature in the coding tree and indicate a shift in the academic literature about HR outsourcing.
Findings from the interviews
planning outsourcing to improve efficiency and thus save money stimulated company X to start a business case as soon as possible. Company X regards financial profit as the most important decision factor. The HR manager mentioned that financial savings for the company and time savings for team leaders will be the two most important factors when deciding whether or not to start with workforce planning outsourcing. Randstad is planning to start a business case, which will be used to showcase the possible benefits of workforce planning outsourcing. The results of this business case will determine if company X starts with workforce planning outsourcing. This is supported by Kamerling, who also states: “if Randstad can prove cost savings in a business case, McCain Lewedorp will apply IWP.”
According to Paul Ceelen, the reason Friesland Campina will not start with IWP has to do with the costs. They are not convinced that workforce planning outsourcing will save them more money when taking into account the amount they would have to pay for the services. The rejection of the offer by Randstad made them look for alternatives. They found a partially in-house alternative and decided to hire a software company to work with them and create a software program similar in function to that of Randstad, but cheaper.
The shift in the literature from cost savings to strategic outsourcing also became apparent during the interviews. All three managers indicated costs as being their main decision factor, but they also asked: what else? The interviewees view Randstad as an employability expert. The offering of workforce planning outsourcing and the perceived skills and competences of Randstad gives the interviewees a more strategic outlook on outsourcing to Randstad. They ask: where can their skills further support our business? "Durable employability, is perhaps a more important subject to discuss and how can an employment partner, like Randstad, assist in keeping the workforce employable?” (Kamerling), "I would like to see suppliers think with us and help us improve our business, instead of just delivering their services or goods” (Ceelen), “We aim at a durable long-term relationship with our partners, but this is based on a win-win. What else will Randstad help us with?” (Mr. X).
4.2 Findings regarding decision maker
Making a decision about outsourcing workforce planning is done by one or more persons. These decision makers are influenced by all kinds of personal traits, preferences and prior knowledge (Dickman and Tyson, 2004). This paragraph discusses the individual traits found that possibly in-fluence decisions regarding workforce planning outsourcing.
Findings from the coding tree
literature sources from the coding tree (Alewell and Hauff, 2011, Dickman and Tyson, 2004, Smith et al., 2006), personal preferences and previous experiences influence the decisions made by managers regarding HR outsourcing. These personal characteristics determine whether a person is inclined to take risks or prefers to wait for the results from other companies. In addition, according to the literature (Alewell and Hauff, 2011), former experiences with outsourcing influence will also influence the decision maker. Negative experiences will lead to a focus on the potential pitfalls and positive experiences can lead to failing to recognise possible pitfalls (Alewell and Hauff, 2011).
Findings from the interviews
The literature sources from the coding tree show consensus regarding personal characteristics. The interviewees, however, form a stark contrast to this. Personal characteristics were not mentioned by the interviewees as a factor influencing their decision regarding workforce planning outsourcing. All the interviewees indicated that they need hard proof of cost savings prior to implementing workforce planning outsourcing. The interviewees all stated that they make decisions based on facts, not personal preferences or previous experiences. “Financial savings and savings on time will be decisive” (Mr. X), "if Randstad can proof savings in a business case, McCain will use IWP" (Kamerling). “I can invest what I want, as long as I can proof a reasonable return on investments” (Ceelen).
4.3 Findings regarding knowledge
Decision-making on HR outsourcing relies on knowledge. Without proper knowledge of their own processes (Smith, 2006), competencies (Ruffo, 2007) and strategy, a company can never know if outsourcing is the right decision, even if there are possible cost savings. Another required knowledge is of outsourcing itself; without proper knowledge on how outsourcing should be done, a company cannot successfully outsource parts of its business (Smith, 2006).
Findings from the coding tree
The literature from the coding tree indicates that many companies have never considered outsourcing as a way of procuring HR services such as workforce planning (Smith et al., 2006). This inhibits them from seeing the potential opportunities (Alewell et al., 2009). A lack of knowledge on HR outsourcing can also result in outsourcing for the wrong reasons, for instance outsourcing because other companies did it, instead of doing it because it benefits the business (Boguslauksas and Kvedaravicienne, 2008). Or as stated before, quick and easy cost savings.
need to focus on their core business indicates that companies have a good knowledge of their own processes (Boguslauksas and Kevedaraviciene, 2008). But it is more common that companies do not know what parts of their business can and should be outsourced. This is illustrated by the literature from the coding tree, which indicates that many companies have a gap in their knowledge when it comes to their own internal processes and abilities within their HR department (Kosnik, 2006, Boguslauksas and Kevedaraviciene, 2008).
The idea of focusing on core competencies did not seem important and strategic until some companies were engaged in this and showed they perform better by outsourcing non-core processes (Boguslaukas and Kvedaraviciene, 2009). For many companies, it is difficult to indicate what their core product and process is (Boguslauksas and Kevedaraviciene, 2008, Boguslauksas and Kevedaraviciene, 2009, Ruffo et al., 2007). Knowing what your own core processes are and what your own core product is, is one of the first steps of a proper outsourcing project. The lack of knowledge of one’s own processes is further illustrated by the fact that outsourcing can expose employee’s weaknesses of which a company is unaware (Alewell and Hauff, 2011).
When outsourcing becomes a strategic decision, the fit between the company’s own strategy and the changes in the company processes resulting from outsourcing becomes more important. Establishing this link is often skipped and outsourcing is used as a de facto solution (Boguslauksas and Kvedaraviciene, 2008). It requires knowledge of one’s own strategy to see and predict the strategic impact of outsourcing. This missing link in business strategy is the biggest mistake a company can make when outsourcing (Boguslauksas and Kvedaraviciene, 2008). It can also lead to significant resistance from the HR department (Kosnik, 2006). Outsourcing should permit the organisation to leverage the capabilities required in today’s global business environment (Gunasekaran et al., 2014).
Findings from the interviews
important gain for the employees.” This step has now been taken without workforce planning outsourcing and could probably have been done sooner.
4.4 Findings regarding quality of vendor
The perceived quality of a vendor of outsourcing services is important for companies making a decision about HR outsourcing. According to the third level code in the coding tree, the perceived quality consists of two factors: skills of the vendor and trust in the vendor. These factors are based on current and prior experiences with the vendor and on the reputation of the vendor.
Findings from the coding tree
The skills of the vendor must have a strategic fit with the company making a decision on outsourcing. A strategic fit creates the possibility to leverage expertise and technology with a greater and continuous benefit (Boguslauksas and Kvedaraviciene, 2008). Therefore, access to technology and skills is an important drive in the decision-making regarding outsourcing (Mayer et al., 2012, Kosnik et al., 2006, Nielsen, 2014). Access to technology and skills are also likely to achieve a higher quality (Xiao et al., 2014).
Trust in the vendor is not something that happens overnight. It is created by experiences, reputation and expectations (Dickman and Tyson, 2012) about the vendor. In this study trust refers to the confidence companies have in the competence and skills of the vendor. And the ability of the vendor to perform as agreed upon. The first and second level code that lead to the trust in the vendor are composed of factors that deal with expectations about the vendor. It was found that the trust in a vendor is closely intertwined with the expectations a purchaser has of the skills, quality and flexibility of the vendor (Alewell and Hauff, 2011, Dickman and Tyson, 2012). The literature also indicates that the length of a contract is important for establishing trust; a long-term contract shows that both parties involved trust each other and increases the chance of success (Lee and Kim, 2010).
Findings from the interviews
There is a difference between the long-term customers of Randstad and their new customer. Where the long-term customers already trust Randstad to perform as agreed upon, the new customer does not have that trust. McCain just recently started to cooperate with Randstad and is reluctant to start with something as invasive as outsourcing workforce planning. “The performance of Randstad up until now does not create the trust we need to start with IWP.” (Kamerling). The reason for this is that his experiences with Randstad Inhouse Services has so far not been flawless (Kamerling). The other two companies are both long-term customers of Randstad and confident in their skills. This confidence allows them to trust the judgement of Randstad and continue with a business case, assessing the potential of outsourcing workforce planning within their companies. The trust is further increased by a knowledge session attended at NXP. “Randstad has a responsibility to respond to day off requests within a certain time frame. At NXP they keep to this responsibility and that makes it very clear for the employees.” (Mr. X).
5. Discussion
Many similar results were acquired from the different data sources, however, there are some differences with regard to the findings from the literature and the case study research. This chapter discusses the findings from our research. And it presents - to the best of our abilities based on those findings - a number of propositions. It must be noted that all propositions are developed through qualitative research methods and still require empirical testing with a sample that is larger than the group of participants in this study. Hence, these propositions offer a starting point for continued research in this field, and they offer cues for the development of new services in the HR sector.
Proposition 1
The question “what else?” illustrates how the interviewees view employment agencies. The interviewees view employment agencies as more than a supplier of temporary employees; they consider employment agencies to be experts on employment, employability and workforce management. These perceived skills are becoming more and more relevant to the companies because of changes in legislation (Kamerling).
In the Netherlands, the retirement age is going up and the maximum length of temporary contracts has been shortened. The changes in legislation create new challenges for employers with regard to the management of their workforce. The search for solutions to this problem elicits the interviewees’ question mentioned above; “what else?”. The interviewees think that the expertise of employment agencies can help them to improve the career paths of their employees and help maintain their employability.
Proposition 1: The search of companies for outsourcing opportunities of HR functions is more likely to lead to outsourcing of workforce management than outsourcing of workforce planning.
Proposition 2
Outsourcing workforce planning is sold as a cost saving opportunity. This is logical, since the literature and the interviewees indicate costs as the most important factor influencing their decision to outsource their workforce planning. What is interesting to notice here is that both the literature (Nielsen, 2014, Gunasekaran, 2014) and the interviewees show a shift from pure cost savings towards other factors becoming more important when making decisions on outsourcing.
The problem with a focus on cost savings is illustrated by the fact that Friesland Campina declined the offer from Randstad, because they thought the costs of IWP are higher than the potential cost savings. They found a cheaper alternative to outsourcing workforce planning by developing their own software, similar in functionality to the software of Randstad.
When financial benefits are the major selling point, competing alternatives will arise. And companies will search for alternatives to find the lowest price possible. Competition based on operational effectiveness alone is mutually destructive (Porter, 1996). That is why we do not think that outsourcing workforce planning, by itself, is a viable business model for employment agencies. It has to compete not only with other employment agencies, but also with the various internal and external parties of their customers. And, a focus on cost savings is one of the main reasons why most HR outsourcing projects fail or do not yield the expected results (Belcourt, 2006).
Proposition 2: Perceived cost reductions have no effect on the decision to outsource workforce planning.
Proposition 3
A singular focus on short-term financial gains results in companies forsaking the opportunity to use outsourcing workforce planning to create a sustainable competitive advantage.
The production manager of Friesland Campina indicated that the software company cannot add the potential value that an employment agency can due to their workforce management expertise. Friesland Campina is willing to pay a premium for those skills. We think using those perceived and hard to copy workforce management skills in addition to outsourcing workforce planning is much more likely to create a sustainable competitive advantage. This in contrast to a software based service, which has proven to be reproducible by a software company.
Proposition 4
We don’t think developing OWM services is the sole responsibility of an employment agency; it needs to be a joint effort between an employment agency and their customers. The companies interested in OWM cannot expect the employment agency to do all the work and find out what services match their company. There are multiple frameworks in the literature that describe how to outsource parts of a business. Most of them agree that the first task of any organisation interested in outsourcing is defining its core competencies (Koulopoulus, 2006). After this self-examination, companies can distinguish between their core and non-core processes. Core competencies are something a company can do better than a competitor (Boguslauksas and Kvedaraviciene, 2009).
It became clear during the interviews that companies view the outsourcing of workforce planning primarily as a cost saving opportunity. This result is strengthened by the fact that companies do not follow the steps towards a proper outsourcing project as suggested in the literature.
None of the interviewed companies indicated that they examined their HR department to define their core competencies. This is why when applying an outsourcing framework, in combination with OWM, we think it is important for companies to focus on the HR department. This focus on HR will help the companies find weak spots and determine what parts of their HR department can and should be outsourced. The results can be used by both the employment agency and the company involved to tailor OWM services to the needs of the company.
6. Conclusion
This chapter will summarise the research goal and the research methods used. It will finish with a summary of the factors found to influence the decision-making process on workforce planning outsourcing. And four propositions that offer cues for the development of new services in the HR sector.
6.1 Research goals
Flexibility is one of the characteristics companies need to have to be competitive. This flexibility helps companies keep or gain a competitive advantage. It creates an effective buffer against various forms of variability in manufacturing. But flexibility also creates a fluctuating workforce demand. It is important to have an effective workforce planning, since workforce costs are a large part of the costs for manufacturing companies. An effective and efficient workforce planning aims at having the right employee with the right skill at the right place at the right time. A relatively new option to keep this process effective and efficient is outsourcing the workforce planning. According to the literature, there is little development in outsourcing the workforce planning because companies are reluctant to outsource this process. It is unknown what factors are considered before making a decision on the outsourcing of the workforce planning. That is why this study investigates the factors that influence the decision to begin outsourcing the workforce planning. This study focused on the food manufacturing sector in the Netherlands.
This research has contributed to the knowledge of outsourcing and specifically of human resource outsourcing by identifying the factors that influence the decision-making of companies regarding the outsourcing of the workforce planning. The goal of this study was to create knowledge of the factors that influences the decision-making process on the outsourcing of workforce planning. To achieve this goal, two data collection methods were used. A literature study was conducted and semi-structured interviews with an embedded questionnaire were held. The literature study was used to find factors that possibly influence HR sourcing decisions. The semi-structured interviews were held to find the factors used by managers to make a decision regarding outsourcing of their workforce planning. The questionnaire was used to validate the findings from the interviews and create a ranking of the factors that were found.
6.2 Research methods
stages of the decision-making process: one had already made the decision not to outsource the workforce planning, one was planning to start a business case, and one had not yet made any decisions regarding the outsourcing of workforce planning.
The factors found in the literature were used to generate the findings and as input for the interviews. The interviews mostly supported the findings from the literature. To further validate the findings from the interviews, a questionnaire was held in which the three managers were asked to rank the factors. Factors that were named as important during the interviews were also ranked high in the questionnaire. The factors determined to be the most important in the structured literature review and the case study are deemed to be the key decision factors influencing decision-making on outsourcing workforce planning. The following four factors were identified:
1. Costs
2. Knowledge
3. Quality of vendor 4. Decision maker
Both the structured literature review and the case study identified cost savings as the most important factor. The other three factors are currently not deciding factors, but do play a role in the process prior to making a decision. Knowledge refers to both internal and external knowledge of the company. It consists of knowing how and what to outsource. The quality of the vendor is based on previous experiences with the employment agency service offering to take over the workforce planning. The last factor, decision maker was not supported by the interviewees. The factor consists of various characteristics of the decision maker, such as their personal preferences and experiences.
Based on our findings and to the best of our abilities we developed four propositions. It must be noted that all propositions are developed through qualitative research methods and still require empirical testing with a sample that is larger than the group of participants in this study. Hence, these propositions offer a starting point for continued research in this field, and they offer cues for the development of new services in the HR sector.
- Proposition 1: The search of companies for outsourcing opportunities of HR functions is more likely to lead to outsourcing of workforce management than outsourcing of workforce planning. - Proposition 2: Perceived cost reductions have no effect on the decision to outsource workforce
- Proposition 3: Perceived improvements in the quality of the workforce has a positive effect on the decision to outsource the workforce planning.
7. Limitations and further research
Just like every research, this one has its limitations. This chapter discusses the limitations encountered during the research and gives recommendations for further research.
7.1 Limitations
The findings in this research are limited for several reasons. Due to time constraints, not every article on outsourcing could be analysed. It is therefore possible that important factors that may be mentioned in the literature have not been taken into account in this study. The time constraints also limited us in the ability to test our propositions. Furthermore, only three companies were interviewed, which limits the generalisability of the results. One of the companies was unfamiliar with outsourcing workforce planning. This made it more difficult to focus solely on outsourcing workforce planning during the interview.
Due to the limited number of companies currently involved in outsourcing workforce planning, we were only able to interview managers in the manufacturing sector in this research. A further limitation was created by the fact that all three companies that were interviewed are companies in the food sector with a relatively uncomplicated production process. Other factors might be important in other sectors.
Only two of the three interviewees returned the questionnaire. This restricts the possibility to validate the findings. All interviewed companies that are part of the research were provided to us by Randstad. They were all working on the same business offering provided to them by Randstad. This creates a possible bias, however, because we had to do a structured literature review on HR outsourcing instead of outsourcing workforce planning, we think that our findings hold significant value for any company that is considering to outsource part of their HR.
7.2 Further research
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9. Appendices
9.1 Interview ProtocolSemi structured Interview Protocol Thesis Outsourcing Workforce Planning Valentijn Reuvers
30-11-2015
Welkom, Bedankt voor uw tijd en deelname aan dit interview. Voorstel moment: Valentijn Reuvers, student aan de rijksuniversiteit Groningen, in de master Technology and Operations Management. Voor de master de bachelor Technologie Management richting discrete technologie. In de bachelor vooral bezig geweest met bedrijfskunde, product ontwikkeling, materiaal eigenschapen en market-ing. Bachelor thesis onderzoek gedaan bij bolletje, ontbijtkoeken lijn verbeterd met 40%, indi-vidueel theorie onderzoek naar de outsourcing van onderhoud in een TPM omgeving.
Nu aan het einde van de Master, hierin academische vaardigheden opgedaan met betrekking tot academisch onderzoek. Verder verdieping op het gebied van operations, IT en management. Af-sluiten bezig met het schrijven van een Thesis over intergraal plannen met begeleiding van Kevin Ritico (Randstad) en prof. dr. K.J. Roodbergen.
1. Mag het interview opgenomen worden?
5. Mag de geïnterviewde bij naam genoemd worden in de Thesis? 6. Mag het bedrijf bij naam genoemd worden in de Thesis
7. Heeft u nog vragen voor het interview begint?
………
Deel 1. Introductie bedrijf en geïnterviewde
1.1. Kunt u iets vertellen over uw bedrijf en uw functie binnen het bedrijf?
1.2. Wat zijn uw hoofdtaken binnen dit bedrijf? En welke andere taken vervult u? 1.3. Wat was uw verantwoordelijkheid m.b.t de beslissing te starten met IWP?
1.4. Kunt u vertellen hoe [naam bedrijf] in contact is gekomen met IWP en waarom er besloten is te bekijken of IWP binnen [naam bedrijf] past?
1.5. Wat is de huidige stand van de IWP implementatie binnen [naam bedrijf]?
………
Deel 2. Beslissingen omtrent IWP
2.1. Wat vond u in eerste instantie van IWP?
2.2. Wat waren in eerste instantie de voor en nadelen voor [naam bedrijf] m.b.t IWP?
2.3. Hoe is het traject verlopen van eerste kennismaking tot uiteindelijke implementatie?
2.4. Welke voordelen zijn er verder besproken en beoordeeld tijdens het traject? 2.4.1. In geval van beperkte reactie (bv. kosten reductie en tijd winst)
Meer focus op de core business, meer duidelijkheid m.b.t verlof verzoeken, rust onder personeel, vinden van zwakke punten in process/personeel?
2.5. Welke nadelen zijn er verder besproken en beoordeeld tijdens het traject?
