Concerning the disconnect between academia and the business world, the classic adage comes to mind: “He who can, does. He who cannot, teaches” (Shaw, 1903). However, this essay does not aim to address whether or not academicians are fundamentally incapable of functioning in real-world business application, but rather compare and and contrast the theoretical and practical differences between “formal research” and “business proposals”. As a two-part essay, the discussion will continue, then, to examine the effects of human resources outsourcing (HRO) on leadership performance and employee commitment.
Research is “simply the process of finding solutions to a problem after a thorough study and analysis of the situational factors” (Sekaran & Bougie, 2010). While individuals use research as a means of making informed decisions – professionally and personally – the idea of formal research is arguably most associated with images of academic or scientific fields. The inherent impracticality of formal research application to business management is the disconnect between the two disciplines. As M. Ronald Buckley, et al. noted in “The Disconnect Between the Science and Practice of Management” (Business Horizons, 1998), “The major academic goals of business scholars are publication and tenure … academics are trained to generate knowledge in our disciplines, not solve organizational problems”. For this reason, academicians are often thought to be out of touch with the “real world”. Contrastingly, the purpose of a business proposal is to present an idea. It does not necessarily require the support of formal research, but the ability to influence others.
This points out a clear cut difference between theoretical findings of research and practical application of business proposals: the later, much more than the sooner, requires an understanding of human nature, be it increasing productivity and employee morale, or a new product launch. This is not to say that research has no place in business proposals – researching psychological responses to various conditions in the workplace can lead to implementing changes for increased productivity, or knowing the strengths and weaknesses of market competition can help with developing a better product.
However, what formal research might overlook is consumer tendency toward elements like brand loyalty, or even personal barriers that are interfering with employee productivity. Beyond this, formal research and business proposals are intended for different audiences. Formal research, generally following structured steps: problem, hypothesis, experiment, communicate results. Most often, the results of a formally researched subject are published in books and scholarly journals.
The target audience is generally other academics, the writing style and jargon used being beyond the comprehension of the average non-academic. On the other hand, business proposals are less structured, and the final information is generally presented in layman’s terms to a manager, or decision making body. Further yet, formal research has a tendency to follow the path of reflective decision making. Over the course of collecting empirical data, an academic researcher has the time to examine and reexamine a given hypothesis and collect samples for a thorough research.
Conversely, business operations often require split decisions, leaving leaders to employ “gut instinct”. In short, formal research and business proposals both follow similar guidelines: gathering information, publishing that information in a report, and presenting the report to achieve a particular outcome. Where they differ is that desired outcome – formal researchers aims toward publication and tenure, whereas business proposals are intended to persuade a particular business decision.
Moving on, it is hypothesized that HRO has a negative effect on leadership performance and employee commitment, not only with a firm’s organic employees, but also with a firm’s decreased oversight on outsourced operations. The following literature reviews attempt to provide evidence for that hypothesis, examining HRO along with outsourcing functions in other industries. In a research article by Dean Elmuti (2003), four questions were addressed for guiding the study. First, to what extent does the degree of familiarity and utilization of the outsourcing strategy vary across a variety of settings?
Next, why do organizations undertake outsourcing projects? Third, do outsourcing programs achieve their stated objectives of improving organizational performance, productivity, marketshare, and quality? And finally, what factors are associated with the success or failure of outsourcing programs? To answer the questions, 1500 randomly selected organizations across the United States received a survey of outsourcing strategy. The study found that most business decisions to employ outsourcing strategies directly correlate with the company’s bottom line.
Reasons identified included cost reduction, improved quality, improved delivery and reliability, access to materials only available abroad, establish a presence in foreign market, use resources not available internally, reduce the overall amount of specialized skills and knowledge needed for operations, make capital funds available for more profitable operations, and focus on core competencies of the corporation. Even with these reasons for outsourcing, firms identified that negative effects of outsourcing included reduced employee performance.
This was largely due to fears of operational changes and layoffs. In essence, employees lost loyalty to a firm that was seemingly outsourcing their jobs. However, firms that reported successful outsourcing strategies stated that open communication was key for that success. Similarly, other fears included inadequate control systems for how services were delivered, as well as hidden costs and risks such as travel , license fees, exchange rates, and foreign taxes. Again, for successful outsourcing strategies, many of these were mitigated by treating the outsourcing as a partnership rather than a contract.
While this study did identify organizational performance issues associated with outsourcing, it was also limited with its methodology in data collection. Using a survey limited it to a small sample size. It was also susceptible to variable data reporting. Next, the effects of outsourcing are examined in a study of employee loyalty in the aerospace industry (Douglas, 2008). The study conducted in-depth interviews – using full transcripts for developing results – with 20 aerospace employees ranging in demographic between sex, management and non-management, and length of employment, with at least one year on the job.
The results of the study were clustered into several categories: (1) participant perceptions of employee loyalty, (2) participant feelings associated with employee loyalty, (3) participant perceptions about why companies engage in outsourcing, (4) participant feelings associated with outsourcing, (5) participant perceptions regarding outsourcing’s impact on employee loyalty, (6) participant perceptions regarding outsourcing’s impact on employee performance, and (7) participant perceptions regarding outsourcing’s impact on employee behavior.
An example of the findings is that 100% of the participants stated they would exert considerable effort on the company’s behalf, but only 30% professed loyalty or commitment to their company. Likewise, while 60% of the participants claimed happiness, merely 5% claimed a sense of belonging to the company. Overall, the results of the study pointed to outsourcing having a negative role on leadership performance and employee commitment.
But like the first study in this literature review, results suggested that open communication, and efforts to provide alternative employment for affected employees were found to potentially mitigate the negative impact of outsourcing on employee commitment. This study encountered result limitations based on its small sample size. Still, through a thorough cross examination of the participants, it could be confidently concluded that outsourcing elements of an organization negatively affect employee loyalty and commitment.
Rather than simply looking at the effects of outsourcing on employee commitment, the next two studies look first at the reasons for HRO, then at what organizations have done to make it successful on all fronts. An educational report from the Health Financial Management Association (2012) examined the benefits and shortcomings of HRO in the health industry. The report suggested that while outsourcing can afford a new level of expertise, create efficiencies, and strategically position an organization, what functions actually get outsourced need to be carefully considered.
For example, the report pointed out that choosing a poor HRO strategy can result in an HR department that seems removed from employees. Outsourcing primarily administrative HR functions might allow successful outsourcing strategy without alienating employees and giving them flags for concern. The report also pointed out that outsourcing is not a cure for institutional problems. If employee issues exist, a holistic approach needs to be taken to solve those issues.
As a running theme, open communication was again identified as a means of mitigating employee concerns while transitioning into outsourced efforts – the report suggested periodic staff surveys can collect the positive and negative opinions of employees. In a final study, Tremblay, et al. (2008) examined the cost and benefit of HRO across a spectrum of Canadian firms. The study suggested that, evident through several recent surveys, organizational interest in HRO is increasing – more than 60% of companies outsourced at least part of their HR functions.
The primary question addressed in this article was, what are the determinants of HRO? Literature, according to this article, suggests that top management support is imperative to the success of an HRO strategy. Additionally, rather than considering the effects of outsourcing on staff, firms consider HRO based on their competition implementing an HRO strategy. But there are several factors the report indicated that might suggest the cost of outsourcing in fact outweighs the benefits. First is the loss of control in day-to-day activities.
Giving up control of HR functions creates a vulnerability for organizations. Another disincentive factor noted by the report is unions. Organizations with a bargaining unit could face strong – and costly – opposition when it comes to outsourcing. Additionally, this stress can potentially erode a firm’s cohesiveness and contribute to a decline of morale and productivity. This report suggested that the more an organization perceives such risks, the less likely it will outsource its HR activities.
This essay addressed the the theoretical and practical differences between formal research and business proposals. In summary, formal research is generally reflective and conducted in a controlled environment, with established steps to thoroughly conclude the results of a hypothesis. In contrast, business proposals are far less structured, and generally employ expedient research methods. While academic research should theoretically aim to resolve problems in the business environment, realistically it is self serving for academicians to gain publication and tenure.
Further, through literature review, evidence was drawn upon to support the hypothesis that HRO has a negative effect on leadership performance and employee commitment. Substantial studies have been conducted to support that employees of a firm faced with outsourcing lose loyalty and commitment to the organization, while also increasing stress in fear of job stability. But evidence also suggests that open communication can mitigate negative effects of outsourcing on employee performance. Additionally, there is enough evidence to suggest that the cost of outsourcing might exceed the benefits. It really falls to each firm to examine the cost-benefit ratio.
Shaw, G. B. (1903). Man and superman. New York: Brentano’s. Sekaran, U. , & Bougie, R. (2010). Research methods for business: A skill building approach. (5th ed. ). John Wiley & Sons. Buckley, M. R. , Ferris, G. , Bernardin, J. , & Harvey, M. (1998). The disconnect between the science and practice of management. Business Horizons, 31-38. Elmuti, D. (2003). The perceived impact of outsourcing on organizational performance. American Journal of Business, 18(2). Douglas, R. (2008).
The influence of outsourcing on organizational loyalty: A phenomenological study in the aerospace industry. (Doctoral dissertation). Healthcare financial management association, (2012). Using outsourcing to transform human resource functions. Retrieved from website: www. hfma. org Tremblay, M. , Patry, M. , & Lanoie, P. (2008). Human resources outsourcing in canadian organizations: An empirical analysis of the role of organizational characteristics, transaction costs and risks. The International Journal of Human Resource Management, 19(4), 683-715.