Human Resource Management Outsourcing

This chapter provides an overview of the current literature on human resource management outsourcing (HRO). Human resource management outsourcing involves contracting out activities traditionally performed by the organization’s human resource department to an outside organization. While HRO is a popular topic, there are few reliable sources on the extent to which organizations implement the approach. Further, research has indicated that the overall impact of HRO is not always straightforward, with studies suggesting small positive effects on company performance and mixed effects on outcomes related to the functioning of human resource departments. This chapter examines common theoretical foundations of HRO, the need to differentiate outsourcing of different types of human resource activities, factors influencing organizations’ decisions to outsource, and effects of these decisions. It presents empirical data from a comparative HRM study on the prevalence of outsourcing for insights into the contested question of how widespread HRO really is and suggests future directions for HRO research.

HRM formality differences in Pakistani SMEs: a three-sector comparative study

PurposeGuided by institutional theory, this empirical paper examines variations in the adoption of HRM practices among SMEs in three different business sectors (services, manufacturing and trade).Design/methodology/approachData from 300 owners/managers representing three business sectors were collected through a survey method.FindingsThe results suggest that service SMEs use more formal HRM practices than manufacturing and trade SMEs. Manufacturing SMEs are more formal than trade firms. Results are not affected by firm age.Research limitations/implicationsSocial desirability bias may have influenced respondents into portraying a positive image of the organization by inflating HRM sophistication. A further limitation is that the performance of the firms was not measured. As such, it is not possible to judge whether greater HRM formality correlated with improved organizational performance.Practical implicationsThis study shows how the business sector shapes HRM practices in Pakistani SMEs. Findings help to inform Pakistan's Small and Medium Enterprise Development Authority (SMEDA) in dealings with manufacturing and trade firms in terms of improving HRM practices.Originality/valueGiven the important role of SMEs in economic development, comparative research on HRM in SME contexts is scarce. Since SMEs are vital for Pakistan's economy, an improved understanding of the sector's approach to human resource development is important. The findings extend the boundaries of prior comparative HRM literature in SMEs by addressing sector influences while controlling for contextual factors.