Human Resources Outsourcing and the impact it has on small businesses

Abstract

The aim of this research is to gather and analyze data to understand the impact that Human Resource Outsourcing (HRO) has on small businesses. For this research, small business is defined as a firm in any industry with more than 50 employees but fewer than 150 employees. According to the Bureau of Labor Statistics (BLS) 18% of small businesses will fail within their first year and of those 82% that do survive 50% will fail after five years. Business owners have cited cash flow problems, inadequate management personnel and lack of employee retention as the top reasons for failure. Human Resource Management (HRM) accounts for 67% of the reasons business owners give for failure of their business. Key indicators of small business success are employees and corporate culture, product and service growth, cash flow, and customer loyalty. Therefore, we aim to answer the research question: How does Human Resource Outsourcing impact small businesses?To investigate this question, the research used a mixed-methods approach: including a qualitative, grounded theory study and a positivist, quantitative study. Areas of study include identifying the knowledge base and skill set of small business owners when it comes to the subject of HRM; investigate the correlation between Organizational Support Theory (OST) and HRO and how it impacts the employee’s life cycle at a small business. The range of outcomes focused on both employee effects and corporate effects. Employee effects were engagement and retention that were concerns of the business owners. Corporate effects will include culture and organizational support. This research validates two new findings: 1) engagement can be fostered through HRO, and 2) the employee perspective of HRO establishing organizational support. Keywords: Human Resource Outsourcing, Human Resource Management, Small Businesses, Employee Engagement, Corporate Culture, Organizational Support Theory