Human resource outsourcing effectiveness: the moderating effects of partnership quality on the service quality-satisfaction-loyalty frameworkTools Sim, Siew Chen (2020) Human resource outsourcing effectiveness: the moderating effects of partnership quality on the service quality-satisfaction-loyalty framework. PhD thesis, University of Nottingham.
AbstractIncreased competition, downsizing, rapid growth or decline, globalisation as well as restructuring in the business world have driven more firms to outsource HR functions. Many Malaysian manufacturers consider outsourcing HR as a conduit to access expert services due to high growth and high investment in the manufacturing sector in recent years. In fact, Malaysia is regarded as a 2nd tier developing outsourcing destination, ranked consistently the 3rd most preferred outsourcing destination after India and China by AT Kearney since 2005. However, against such background, research being conducted to represent the Malaysian outsourcing context and its effectiveness from the service quality perspective is scarce. Relational conditions characterised by partnership quality and its effect on HRO effectiveness remain inadequately explored. Specifically, its conditioning influence on service quality, client satisfaction and loyalty has not been examined together. HR managers or executives who are dealing with HRO matters from 257 manufacturing firms in Malaysia are the respondents of this research. Data are analysed using PLS-SEM. The findings from the structural model for the service quality-satisfaction-loyalty link are consistent with literature, including the mediation effects. Service process quality has greater impact on client satisfaction and loyalty compared to service outcome quality. Interestingly, none of the partnership quality factors such as trust, commitment, mutual understanding and interdependence moderates the relationship between service quality and client satisfaction as hypothesized. However, these factors are consistently found to be negatively significant in moderating the relationship between client satisfaction and client loyalty. The results highlight that although achieving service outcome quality is important, service process quality has a greater impact on client satisfaction and loyalty. The findings also suggest that service providers who are prepared to build or are consciously building partnership quality with their clients are likely to experience greater client retention because by merely achieving client satisfaction is insufficient to retain a client. This research complements the scarcity in HRO literature by providing a nuanced and contextualised understanding of HRO effectiveness from service quality perspective. It contributes to the social exchange theory (SET) by potentially extending one of the SET facets to include other non-economic outcomes. It provides support to the relational exchange (RET) theoretical argument with regards to having to accept the existence of relationalism in all contracted relationships such as HRO without denying the value of formal contractual governance. This research makes several methodological contributions to the field of HRO research as it is one of the few HRO studies that has embarked on a more updated PLS-SEM modelling involving the reflective-formative model and addresses results reporting and the assessment of formative measurement models in human resource management research. Limitations of the research and future research directions are provided as well.
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