Human Resource Outsourcing: Make a Decision and Develop a Successful Model

[[abstract]]There is growing interest in the degree to which human resource outsourcing (HRO) contributes to organizational effectiveness. Yet, limited research attention has been paid to the causal conditions leading to HRO success as well as determinants of HRO decisions. This study explores the antecedents of human resources (HR) outsourcing decisions and how a firm and an HR provider can work together to influence and ensure successful HRO. Using multiple regression analysis, we examine the impacts of strategic involvement of human resources management, cost reduction, and demand uncertainty on the degree of HRO decision and consider the moderating effects of the lack of in-house HR expertise and positive HR outcome. Using fuzzy set qualitative comparative (fsQCA) analysis, we demonstrate how different combinations of the conditions of quality of provider, business understanding, trust, and closed HRO networks can lead to HRO success. In addition, this study compares the causal combinations between cases featuring different levels of HR task interdependence and IT usage in leading HRO success. This study uses data collected from 85 different-sized firms in Vietnam to examine the HRO decisions and 80 firms to investigate how to make HRO successful. Our findings indicate the strategic involvement of human resources management is positively related to the decision to outsource HR. As our expectation, there is a significantly positive relationship between cost reduction and the HR outsourcing decision for non-core HR activities. Demand uncertainty positively relates to the HR outsourcing decision for core HR activities. The lack of HR expertise moderates the process of HR outsourcing for core activities. Regarding a successful HRO model, three common solutions that achieve successful HRO overall. We also contribute toward building new theories regarding HRO, trust, and knowledge sharing, as well as the use of IT. The focus on firms in Vietnam may help to control for cultural factors, but may also limit generalizability. This study cannot compare results across different industries due to the number of samples. Future research could conduct cross-cultural studies on this issue, or compare differences across industries. This study provides HR managers with guidelines for making accurate decisions regarding HR outsourcing as well as developing a successful HRO model. Using theoretical perspectives, the paper analyzes the HR outsourcing in an under-researched area – developing countries