CHAPTER ONE

INTRODUCTION

1.1. Background to the Study

Human resource outsourcing has become a common practice in many organisations, including manufacturing companies in Douala, as they seek to improve their efficiency and focus on their core competences. This process involves contracting external service providers to handle various HR functions such as recruitment, payroll processing, training, and employee benefits administration which could have a significant impact on organizational performance.

In our modern business world marked by fierce competition, organisations that succeed are those that are able to adapt to constant evolutions and changes in the market. This is why the outsourcing of human resources is rapidly evolving and gaining prominence as one of the most exciting business trends. As more and more companies move to outsourcing inclinations and processes that can be said to add little value to the achievement of their business objectives, this trend echoes the need for organisations to focus their resources and time on strategic activities. If implemented correctly, outsourcing can dramatically improve organizational effectiveness (Kisilu & Gatari, 2021; Mulli, 2021), and on average, a company can save a 9% cost through outsourcing. Besides, quality and capacity can be increased about 15% through the process.

Mukucha et al. (2020) asserted that Business Process outsourcing can significantly determine the performance of businesses. Similarly, research done by Sang (2010) found out that Human Resource Outsourcing improves efficiency. Thus, Human resource outsourcing (HRO) can be said to be a substantial strategic HR activity, engineered to assist businesses to shed some weights, channel resources towards their main objectives, simultaneously control their bottom lines, gain cost as well as time, and provide cutting edge HR strategies simply by exploiting the services of a third party to take care of the HR functions that would have normally been done by the organisation. Lyons and Farrington (2006) states that competitive edge is an important concern that allows an organisation to better deal with market forces better than its competitors.

Another undeniable advantage of outsourcing is quality. Most of the organisations indeed search for the best providers with whom to outsource their function, this gives them an opportunity to get their work done by experts implying quality work. This is confirmed by Letica (2016) who defines outsourcing as a strategy by which an organisation contracts some of their main services such as recruitment to specialized and efficient service providers, who transform it to treasured business partners. Following Hadfield (2014) who presents outsourcing as a means to lighten the burden of some Human resource charges of the company, Kalawole and Agha (2015) define outsourcing as a decision by organisations to have an external supplier to perform a function that would have otherwise been performed internally by organization staff. According to a study conducted by Nkamnebe and Eze (2016), the adoption of HR outsourcing in Cameroon is driven by factors such as the need for cost savings, access to specialized HR expertise, and the desire to focus on core business functions.

Several issues about resource outsourcing brought about changes in organisational trends geared towards globalization. Business environments are becoming more global in many organisations. Regional provisions such as North America free Trade Agreement among United States, Canada and Mexico; the use of a single currency in European market and opening boarders for all countries in Eastern Africa encouraged the development of trade on global basis. As a consequence of this trend, organisations have extended geographical depth of their business operations. Arising from this change, organisations have responded rapidly to the market trends and gained opportunities such as greater economies of scale, trading in wide range markets, ensuring high quality of service and obtaining low cost labor sources for the service delivery. In this struggle, organisations can’t guarantee quality in all sectors and are forced to focus on those activities for which they are specialized in and outsource the rest. Sometimes they prefer to outsource those activities that an organisation can’t perform on its own, or activities that service providers can handle better and at a lower price. Outsourcing transfers those activities to organisations specialized in those activities and allow the organization to generate more value by emphasizing on its core activities.

Human resource outsourcing in Cameroon began to gain traction in the early 2000s as companies recognised the benefits of outsourcing non-core functions such as HR. Initially, the focus was on major cities like Douala and Yaoundé, where there was a larger pool of skilled professionals and better infrastructure. Cameroon is witnessing significant economic growth, leading to an increase in the number of organisations operating in various sectors for which our case study will dwell on the industrial sector. The country is also a growing hub of economic activity with numerous organisations operating in various sectors. Manufacturing companies in Douala are of particular interest in this study because it plays a crucial role in the country’s economy, contributing significantly to its GDP and employment generation. Therefore, understanding how HR outsourcing impacts organisational performance in this sector is of great importance. As these organisations strive to remain competitive and efficient, they face challenges in managing their human resource effectively. The manufacturing sector is known for its complex and dynamic operating environment, with companies facing challenges such as global competition, changing consumer demands, and technological advancements. Human resource management thus plays a crucial role in organisational success, as it involves tasks such as recruitment, training, performance evaluation, and employee relations.

Traditionally, in Cameroon, organisations have mostly managed their HR functions internally. However, in recent years, there is a global trend towards outsourcing HR functions which involves transferring certain tasks and responsibilities to specialized third-party vendors. This practice has gained popularity due to potential benefits such as cost reduction, increased efficiency, access to specialized expertise, and the ability to focus on core business activities. As Maku and Iravo (2013) note, over the past two decades there has been a growing recognition of the vital contribution of outsourcing strategy on the performance of organisations. The implications and outcomes of this practice in the context of Cameroon remain largely unexplored. One of the potential benefits of human resource outsourcing is cost reduction. By outsourcing non-core functions such as recruitment and training, organisations can reduce their operational costs and focus on core business activities. According to a study by Lacity and Willcocks (2001), costs reduction is one of the primary motivations for outsourcing human resource functions. The authors found that organisations that outsource their human resource functions can achieve cost savings of up to 20-30%. 

In addition to cost savings, human resource outsourcing can also provide access to specialized expertise and technology, For instance, outsourcing recruitment and training functions to a specialized firm can help organisations to attract and retain top talent. Kakabadse and Kakabadse (2000) noticed that access to specialized expertise is one of the key drivers of human resource outsourcing. The authors argue that by partnering with specialized firms, organisations can benefit from the latest technology and best practices in human resource management.

While the benefits of outsourcing HR are well-documented, it is essential to understand the specific implications and outcomes of this practice in the context of Cameroon. The effect of outsourcing HR on organisational performance indicators, such as employee productivity, satisfaction, and retention, may vary depending on factors such as organisational culture, sector specific requirements, and the availability of outsourcing service providers. On the other hand, a study by Gottfresson, Puryear & Phillips (2005) found that about 50% of firms in their sample reported that their outsourcing programs fell short of expectations; 10% were highly satisfied with cost savings, and 6% were satisfied with their overall outsourcing process. But most often companies benefit more from this policy rather than face losses hence the increased use of it.  

HR outsourcing practice reduces HR costs by developing a diverse set of skills, an unrivalled range of adaptability, and spreading and sharing risks to improve a company’s image (Elmuti et al., 2010; Cicek and Ozer, 2011). As these organizations strive to remain competitive and efficient, effective human resource management becomes crucial. To Nkamnebe and Eze (2016), the government has implemented policies to encourage foreign investments and promote economic growth. These policies may create opportunities for HR outsourcing providers and influence the decision making process of organisations in the country.

1.2. Statement of the Problem

Human Resource Outsourcing (HRO) is a contemporary issue in today’s business world. HR outsourcing as an organisational strategy has increased considerably over the years in the corporate world. Organisations appear to be focusing on a relatively narrow set of functions and are contracting with outside suppliers to perform the others (Bearden, 2013), however there being many outsourcing activities in Cameroon, there is hardly any mention of training outsourcing, recruitment outsourcing which is the focus of this study. The reason behind it may be the paucity of quality academic and non-academic studies in the country.

Currently, the country’s clients such as CHOCOCAM, SOLEVO, COMETAL are motivated towards Human Resource Outsourcing (HRO) only because of its time and money-saving nature. Still, most of them do not utilize Human Resource Outsourcing (HRO) as a source of expertise, the new knowledge, and business sustainability (Carr and Kemmis, 2010). Though Human Resource Outsourcing (HRO) has passed a century of its journey, it is still one of the most deprived areas by human resource management researchers. The number of Human Resource Outsourcing services in Cameroon is not as vast as in the western countries, thus the discussion on their influence will be obliging for  future clients in deciding on activities such as recruitment, training, administration or others that can be outsourced. While some studies have found positive effects of outsourcing training and recruitment such as cost savings and improved efficiency (Cooke & Lafferty, 2003), others have highlighted potential challenges such as loss of control and reduced employee satisfaction (Cascio & Boudreau, 2010). The challenges faced by organisations in Cameroon in managing their human resources effectively have led to a consideration of outsourcing Human Resources.

However, it is unclear how outsourcing impacts organisational performance indicators such as employee productivity, cost, and efficiency in the specific context of manufacturing companies in Douala. Companies in Cameroon face challenges related to talent acquisition, training and workforce management hence the authors argue that outsourcing can help manufacturing companies (Tchikou and Tchikou, 2017). As these companies face increasing pressure to improve operational efficiency, they are turning to human resource outsourcing as a potential solution. Few empirical analysis regarding that issue have been conducted and still its impact is vague and unexplained (Bolat et.al, 2015). A study conducted by KPMG (2006) found that HR outsourcing in African countries if not done properly-may result in poor performance of the oranisation. Given these potential benefits and drawbacks, it is important to understand the effect of human resource outsourcing on performance of manufacturing companies.

1.3 Research Questions

1.3.1 Main Research Question

What is the effect of human resource outsourcing on performance in manufacturing companies?

1.3.2. Specific Research Question

1. 1. To what extent has recruitment process outsourcing influenced performance in manufacturing companies?
2. 2. What is the effect of training outsourcing on performance in manufacturing companies?

1.4. Objectives of the Study

1.4.1. Main Objective

The main objective of this study is to assess the effect of human resource outsourcing on performance in manufacturing companies.

1.4.2. Specific Objectives

The specific objectives for the study include;

• To assess the effect of recruitment process outsourcing on performance in manufacturing companies
• To determine the effect of training outsourcing on performance in manufacturing companies

1.5. Research Hypotheses

1. Recruitment process outsourcing has a significant effect on performance in manufacturing companies.
2. Training outsourcing has a significant effect on performance in manufacturing companies.