Human resource outsourcing decision-making in Malaysia: The why and how

Human Resource (HR) outsourcing decision-making is important for a company to ensure its competitiveness in business. However, previous research has been lacking in investigating why HR outsourcing is done and how decisions are made. Therefore, this study examines the reasons for outsourcing and the processes of how HR outsourcing decisions are made. Gioia methodology was used to explore the phenomenon in this study through multiple data sources, including interviews and document analysis with a group of HR practitioners from 16 companies in Klang Valley. The purposive sampling method was used to collect the data. The triangulation of the data collection method provided a thick description of the data. The results revealed that two key factors evolved from the findings through the holistic view of why companies outsource HR activities, and these were: 1) economic and 2) efficiency. In addition, two HR decision-making processes emerged from the findings, namely 1) low complexity (for local and regional presence) and 2) high complexity (global presence). These findings contribute to the understanding that transactional costs economics and resource-based view theories are mutually exclusive and no conflict to each other. Apart from the above, these findings contribute to HR outsourcing practices to accomplish their best decision within a reasonable time frame to eliminate the vulnerability of the companies. It also helps outsourcing industry to position business proposals strategically to the potential clients. Overall, the model developed in this study, “decision-making in HR outsourcing”, is adaptable to other functional outsourcing.