HRM outsourcing: the impact of organisational size and HRM strategic involvement

Abstract

PurposeThe aims of this paper are, first, to consider the impact of organisational size and the strategic involvement of the human resource management (HRM) function on the decision to outsource, second, to consider the impact of HRM outsourcing on organisational performance for organisations of different size and where the HRM function has access to positions of elevated political power.Design/methodology/approachThe research examines responses from 441 Australian senior HRM managers who participated in an online survey of a national HRM professional association. The hypotheses were tested using multiple regression.FindingsAlthough results did not confirm the expected relationship between smaller organisational size and increased outsourcing, there was a positive relationship between HRM strategic involvement and the decision to outsource. The relationship between HRM outsourcing and perceived financial performance was positive for smaller firms and negative for larger firms. The positive relationship between strategic HR involvement and organisational effectiveness was also enhanced when HRM activities were kept in‐house rather than when they were outsourced.Research limitations/implicationsOverall, the research findings confirm advantages for smaller firms that seek out external HRM assistance. The results of the study also indicate that there are organisational benefits when an elevated strategic HRM role in an organisation is combined with the decision to develop in‐house HRM activities rather than externalise these responsibilities.Originality/valueUsing political influence theory, the research applies an alternative theoretical perspective to the analysis of HRM outsourcing.