1.1 Background of the Research
Human resource (HR) outsourcing is a contentious topic of debate. Some view HR outsourcing as an opportunity for the HR function, while others view it as a danger. The first perspective indicates that HR outsourcing is a tool that allows HR to become a strategic partner. The second perspective views HR outsourcing as a cost-cutting mechanism that gradually reduces HR personnel. (Delmotte, Sels, 2008).
With rising globalization, outsourcing has become a crucial business strategy, and a competitive advantage may be achieved if products or services are produced more effectively and efficiently by external vendors (Yang, et. al. 2007; McIvor, 2008). Due to the necessity to respond to daily market changes and the difficulties in anticipating the direction of such changes, firms must concentrate on their core competencies and capabilities (McIvor, 2008). Historically, outsourcing is an abbreviation for “using other resources.” Outside means to develop value from outside the firm, rather than from within (Yang, et. al. 2007). Outsourcing enables companies to concentrate on their core competencies by reallocating limited resources to strengthen their core product or service (Lee and Kim, 2010) and to strategically use external providers to conduct service tasks that were formerly internal duties (Raiborn, et. al. 2009; Elmuti, 2004; Bustinza, et. al. 2010). Additionally, outsourcing might involve the transfer of both personnel and physical assets to the service provider (McIvor, 2005).
Efficiency in various organizations is an issue of how well they allocate inputs such as personnel, assets, and subsidies to create the highest output, such as the number of loans, financial independence, and poverty outreach (Balkenhol, 2007). Balkenhol (2010) also provides a working definition of efficiency as the ideal mix of staff time, staff number, and cost of operations to disburse and reach the greatest number of loans and clients, especially the disadvantaged, while providing a variety of valuable services. In other words, when a company pursues efficiency, management will be able to focus on tasks that produce greater returns at little expense to the units and clients. Consequently, emphasis will be placed on the design of appropriate product lines, a successful market strategy, efficient targeting, and the gradual elimination of supply bottlenecks. Gonzalez Vega, (2003) referenced in Martinez-Gonzalez (2008) suggests that available money may be misapplied due to a lack of technically competent personnel in the field of microfinance. The absence of incentive packages may also affect the conduct of employees and management, while blunders in decision-making and policy execution, erroneous regulation and inappropriate interference by donors, and improper product designs and methodology all result in tremendous waste. Martinez-Gonzalez argues that the improvement of the microfinance sector will not be sufficient if wastes persist (2008). These firms' operations are highly dependent on their workforce. An corporation may have unlimited wealth and resources, but without a team to organize ideas, create and promote a product, nothing will reach consumers (Turner and Turner 1995). On a long-term basis, the use of various human resources outsourcing tactics has been found to be related to an organization's performance. Moreover, where proper outsourcing tactics have been implemented, it has been seen that organizational performance has improved. The extent to which outsourcing methods affect organizational outcomes, if some practices have a greater impact than others, and whether complimentary or synergistic relationships between such activities might further improve organizational performance.
1.2 Description of the Problem
Profitability of any enterprise is largely based on the workforce. Profit maximization is impossible without an organized and competent workforce to produce and promote a product, even if a corporation has unlimited funds and resources. There is still some disagreement as to how outsourcing activities influence organizational outcomes, whether some practices have a bigger effect than others, and whether complementary or synergistic relationships between such strategies might further improve organizational performance. Similarly, many HR functions struggle to move beyond the role of administration and employee advocate, and are viewed as reactive rather than proactive strategic partners for the top management. HR organizations also struggle to demonstrate how their activities and processes add value to the organization (Smit, 2006).
1.3 Objective of the Research
This study's primary objective is to determine the effect of outsourcing human resources function on organizational performance. Specifically, the study aims to:
Determine the function of HR in an organization.
2. Analyze the impact of HR outsourcing on the performance of the organization.
Determine why organizations outsource their HR functions.
4. Analyze the elements that restrict the effective operation of HR in a business
1.4 Investigative Question
What is the function of human resources in an organization?
Are there any major effects of outsourcing HR functions on the performance of an organization?
What factors motivate organizations to outsource their HR functions?
What variables inhibit the successful performance of an HR department inside an organization?
1.5 Scientific hypothesis
There is no major influence of outsourcing HR function on the performance of a firm.
There is a considerable relationship between outsourcing HR function and business performance.
1.6 Importance of the Research
This research will make organizations aware of the significance of human resources and the need to examine the impact of outsourcing on their operations. Since the unemployment rate in Nigeria rises, the government will have a better understanding of how to reexamine the policies of corporations that outsource their operations, as it has an impact on job creation, which contributes to economic growth. The research will educate businesses more on outsourcing, guaranteeing that if an organization's objective is to engage in this method of operation, all choices have been thoroughly explored. In addition to assisting enterprises in estimating the relative cost of outsourcing to their businesses, this study will act as a guide and point of reference for future research on the same topic.
1.7 Scope of the Research
This research will be undertaken in Ado-Odo Local Government Area (lga) in the state of Ogun, as the LGA is home to a large number of enterprises. This research will also analyze the HR function and the advantages of outsourcing HR functions.
THE EFFECT OF OUTSOURCING THE HUMAN RESOURCES FUNCTION ON ORGANIZATIONAL PERFORMANCE