Outsourcing The Human Resource Function: Environmental and Organizational Characteristics That Affect HR Performance

Abstract

A theoretical model is presented that identifies environmental and organizational
characteristics that affect human resource (HR) performance in an organization.
Specifically, we address the issue of when and under what circumstances
does HR outsourcing contribute value to the firm by attempting to identify environmental
and organizational characteristics that affect HR department performance
and how HR outsourcing mediates that relationship. We propose that supplier
competition in the HR provider market has a direct effect on the amount of HR
outsourcing which in turn has a direct effect on HR performance. Environmental
uncertainty (primary, competitive, and supplier) is proposed to moderate the relationship
between amount of HR outsourcing and HR performance while asset
specificity is proposed to moderate the relationship between supplier competition
and amount of HR outsourcing. An earlier version of this paper was presented at
the Southwest Academy of Management meeting in Houston, Texas, March, 2003,
and received the 2003 Irwin/McGraw-Hill Distinguished Paper Award.