




































 

 

                  ISSN : 2693 6356 

2020 | Vol 3 | Issue 2 

 

Effects of Outsourcing Human Resources on Bangalore's Manufacturing 

Sector 
DR.Mounika guptha 

Associate Professor,  

Smt. VHD Central Institute of Home Science, Sesadri Road, 

Tirupathi 

       

      Abstract 
In the context of drug identification, the Rasa (taste) parameter is one of the immediately perceptible ones, 

whereas the Veerya (potency) and the Vipaka (bio-transformation) parameters are inferable. Ayurvedic 

medicine relies on these principles to foretell how a certain medicament will perform. C. Dwarakanath 

developed a taste threshold approach that may be used to identify the dominating Rasa in a substance. The 

Madhuraskandha, or group of medications characterized by their predominance of the sweet flavor, 

consists of ten different substances. Substances and Techniques: The research included 60 (610) healthy 

female participants and used a single-blind, forced-choice design. All of the samples were given out in both 

warm and chilly versions. Using a Likert scale, the participants were asked to record when they could first 

detect a flavor and when they could no longer do so. Appropriate statistical approaches were used to 

examine the data collected. When comparing the two dose forms of the sample drugs Vidari, Eranda, 

Gokshura, and Guduchi to the gold standard medicine, a statistically significant difference was detected at 

the threshold point of taste perception. By comparing the Rasa of Madhuraskandha to the reference 

standard medication, we may conclude that the strength of the Rasa can be classified as mild, moderate, or 

severe (Tara tamattva). The Rasa strength of the 10 herbs used for this study ranges from mild 

(Vidarikanda and Eranda) to strong (Gokshura, Kantakari, Guduchi, Shalaparni, and Shatavari). 

 

 

INTRODUCTION 

Outsourcing has become one of the most 

popular methods of doing business as a result 

of the rise of globalization (Felix & Shale, 

2016). To improve service and product quality, 

shorten production cycle times, and save costs, 

many businesses have turned to outsourcing in 

recent years (Cooke et al., 2005). The 

performance of a company is also greatly 

impacted by the outsourcing industry's ability 

to help businesses strengthen their core 

strengths. Companies should specialize on a 

small number of core operations and contract 

out the rest to other companies (Delmotte & 

Sels, 2008). This approach aimed to outsource 

low-value-added tasks to other companies 

while focusing on the core competencies that 

gave the company a competitive edge 

(Hirschhorn & Gilmore, 1992; Ulrich et al., 

2008).Achieving a sustainable competitive 

edge remains a challenge, despite the growing 

popularity of outsourcing. As a result, 

businesses have benefited greatly from 

delegating non-core functions to specialists 

(Dess et al., 1995; Kotabe et al., 2008; Quinn, 

2000) so that they may devote more resources 

to their highest-impact initiatives. Spending on 

infrastructure, tools, and employees may all be 

cut by outsourcing (Bettis et al., 1992). 

However, there is anecdotal evidence to show 

that an organization's heavy dependence on 

outsourcing might lead to a loss of creativity, 

greater competition from outsourcing partners, 

and diminished ability to direct the outsourced 

work. As a result, it is difficult to predict how 

outsourcing would affect productivity (Kshetri, 

2007). 

 

 



 

 

 

The proliferation of outsourced services may 

largely be attributed to the rise of information 

technology. When a company outsources a 

business process, it contracts with a third party 

to handle duties that were previously 

performed in-house. Finance and accounting, 

investment and capital management, human 

resources, purchasing, logistics, real estate 

management, and other areas like energy 

services, customer-management services, e-

mail delivery, and food supplies are just a few 

of the seven areas identified by John Halvey 

and Barbara Murphy (2007) as candidates for 

outsourcing. 

As a subset of BPO, human resource 

outsourcing (HRO) handles everything from 

recruitment to employee perks including pay 

checks and vacation time (Halvey & Murphy 

Melby, 2007). Human resources (HR) tasks 

might be outsourced in whole or in part to a 

third party (Bakanauskiene & Brasaite, 2015). 

Businesses may save both time and money as a 

result. Businesses in India are beginning to see 

it as a viable strategic choice.Human resources 

outsourcing is shifting its focus to India's 

rapidly expanding sector. The abundance of 

English speakers, competitive wages, and 

strategic location all contribute to the country's 

fast economic development. According to 

www.coolavenues.com, HR outsourcing in 

India was worth roughly $27 million in 2005. 

Recent data reveals that India's market is 

valued between $660 and $70 million, making 

it one of the fastest-growing in the world. As a 

result, its value is forecast to increase at a 

CAGR of 24-26% between 2015 and 2020 

(http://economictimes. indiatimes.com). 

 

 

REVIEW OF LITERATURE 
Klaas McClendon and Gainey 

(2001) have focused on the relationship 

between organizational characteristics 

and HRO reliance. The   eight   

organisational    characteristics were 

considered in the study such as 

idiosyncratic HR practices, HR strategic 

involvement, 

positive HR outcomes, promotional 

opportunities, demand uncertainties, 

pay level,   firm size and outsourcing by 

competitors. The HRO reliance included 

four factors such as HR generalist 

activities, transactional activities, human 

capital activities (i.e., training), and 

recruitment and selection. The results of 

regression analysis showed that there was 

a significant relationship found between 

organisational    characteristics and HRO 

reliance except firm size and HRO by 

competitors. 

 
Morgan (2001) has focused on the 

trends and growth of HR outsourcing. He 

identified that, in the recent past, many 

multi-national corporations including the 

mobile telecommunication companies 

were adopted the HR outsourcing 

practices. It is due to the proliferation of 

human resource outsourcing practices. 

The results of the regression analysis 

showed that there is a significant. 

 
Reed (2001) has identified that 

quality and speedy services at a reduced 

cost were determined the strategic 

business decisions relating to HR 

outsourcing. The study suggested that HR 

practitioners in organisations should take 

adequate steps for providing quality and 

speedy Human Resource Management 

services at affordable cost. 

 
Drucker (2002) observed that 

outsourcing the entire Human Resource 

functions were rapidly growing at a rate 

of 30 percent a year. The study also 

observed that Human Resource 

outsourcing in multinational corporations 

had highly increased and even so more in 

the telecommunication sector. He 

predicted that the HR outsourcing (HRO) 

activities will become a part of business 

strategy for companies of all sizes, 

locations and ownership. 

 

 



 

 

STATEMENT OF THE PROBLEM 

The global economic turbulence 

with the scarcity of resources has 

gradually increased the pressure on 

competitive advantage of firm. So, firms 

are to be found viable solutions to cope 

with the present changing environment. 

The success of any organisation highly 

depends on many factors such as 

productivity, cost efficiency and 

managing the human resources 

strategically. Especially, management of 

human resources is the major issue to any 

business entities in general and it is a 

daunting problem to manufacturing sector 

in particular. 

 

SCOPE OF THE STUDY 

The study is vigilantly carried out 

to analyse the impact of HR outsourcing 

on the performance of manufacturing 

firms in Bangalore. The study focused on 

the type of HR activities outsourced, 

reasons for outsourcing and impact of HR 

outsourcing on the performance of the 

manufacturing firms. Hence, the study 

also analysed the attitude of employees 

towards HR outsourcing. The outcome of 

this study will be immensely helped to the 

manufacturing firms for devising an 

appropriate business policies and 

strategies and also this research will serve 

as a benchmark for all the stakeholders in 

the manufacturing sector. 

 

OBJECTIVES OF THE STUDY 

The present research is carried out 

with the following objectives: 

i) To find out the reasons for HR 

outsourcing and type of HR 

activities outsourced by the 

manufacturing firms in Bangalore. 

ii) To ascertain the level of satisfaction of 

manufacturing firms with HR 

outsourcing. 

iii) To evaluate the impact of HR 

outsourcing on the performance of 

the manufacturing firms in Bangalore. 

 

HYPOTHESES 

Based on the problems identified 

and the objectives of the study, the 

following hypotheses are formulated: 

i) There is no association between 

the firm characteristics and 

satisfaction with HR outsourcing. 

ii) There is no association between 

the firm characteristics and impact 

of HR outsourcing on the 

performance of manufacturing 

industries. 

iii) There is no relationship 

between impact of HR 

outsourcing and the performance 

of manufacturing industries. 

iv) There is no association between 

the demographic profile and 

attitude of employees towards HR 

outsourcing. 

 

RESEARCH STRATEGY 

The study is formed based on the 

descriptive research method. Both 

primary and secondary sources of data 

have been used. The well-structured 

questionnaires have been designed to 

elicit the necessary primary data. The 

secondary data have been collected from 

books, journals, magazines, reports and 

websites, etc. 

LIMITATIONS OF THE STUDY 
 

Like every research, this present 

study also has its own limitations. They 

are presented hereunder: 

 The results of descriptive 

survey methodology are based 

on information provided by 

the respondents which may 

bias the findings. 

 The study was confined to 

manufacturing firms in 

Bangalore. HR outsourcing 

 problems could be sector specific. 

 



 

 

Table - 1 

Type of HR Functions Outsourced 

Type of HR Functions Outsourced Outsourced Not 

Outsourced 

Total 

Recruitment F 150 100 250 

% 60.0 40.0 100 

Pay Roll/Compensation management F 130 120 250 

% 52.0 48.0 100 

Employee background check F 40 210 250 

% 16.0 84.0 100 

Employee Trainings F 180 70 250 
 % 72.0 28.0 100 

HR Information Systems Development F 170 80 250 

% 68.0 32.0 100 

Healthcare/ Other benefits administration F 160 90 250 

% 64.0 36.0 100 

Performance management F 30 220 250 

% 12.0 88.0 100 
 

The type of HR functions 

outsourced divulges that 60 percent of the 

firms are outsourced recruitment process, 

52 percent are outsourced pay roll/ 

compensation management, 16 percent 

are outsourced checking the employees 

background, 72 percent are outsourced 

the employees’ trainings, 68 percent are 

outsourced the HR information systems 

development, 64 percent are outsourced 

the healthcare/ other benefits 

administration and 12 percent are 

outsourced the performance management 

Table - 2 

Reasons for Outsourcing 

Reasons Mean Std. 

Deviation 

Mean 

Rank 

Chi- 

square 

Sig. 

Access to vendors expertise 4.21 .698 5.22  

 

 

 

 

 
175.496 

 

 

 

 

 

 
.000 

Reduce the   expenditure   relating   to   human 

resources 

4.29 .651 5.30 

Improving the quality of the services 4.06 .755 4.59 

Allows time to in-house HR to focus on core 

HR activities 

3.95 .820 4.36 

Streamline HR functions 4.36 .835 5.72 

Managing human resources strategically 4.02 .821 4.66 

To manage the shortage of man power 4.43 .520 5.77 

To improve compliance with standards 4.37 .660 5.76 

To reduce the number of employees 3.65 .803 3.62 

 

The result of Friedman’s Chi-

Square test shows that there is a 

significant difference (P<0.05) found in 

the reasons for outsourcing of HR 

functions .The mean ranks revealed the 

fact that managing shortages in the man 

power is a main reason for outsourcing of 

HR functions (Mean Rank=5.77) 

followed by improve compliance with 

standards (Mean Rank=5.76), streamline 

HR functions (Mean Rank=4.98), reduce 

the expenditures relating to human 



 

 

resources (Mean Rank=5.30), access to 

vendors’ expertise (Mean Rank=5.22), 

managing human resources 

strategically (Mean Rank=4.66), 

improving the quality of services (Mean 

Rank=4.59), allows time to in-house HR 

to focus on core HR activities (Mean 

Rank=4.36) and to reduce the number of 

employees (Mean Rank=3.62). 

 

Table - 3 

Change/ Termination of the Vendor 

Opinion Frequency Percent 

Changed 50 20.0 

Not changed 200 80.0 

Total 250 100.0 

 

The opinion towards change/ 

termination of the vendor reveals that 80 

percent of the companies are not changed 

or terminated the vendor and 20 percent 

of the company are changed or terminated 

the vendor 

 

 

Table - 4 

Reasons for Changing the Vendor 

Reasons Frequency Percent 

Secrecy issues 8 15.5 

Poor quality of services 14 27.0 

Expensive 15 30.5 

Inconsistency 11 21.5 

Ethical grounds 3 5.5 

Total 50 100.0 

 

 

The reasons for changing the 

vendor shows that 30.5 percent of the 

companies are changed the vendor due to 

high cost, followed by 27 percent are 

changed for poor quality of services, 21.5 

percent are changed for inconsistency, 

15.5 percent are changed for secrecy 

issues and 5.5 percent are changed the 

vendor for ethical grounds 

 

 

Table - 5 

Frequency of Performance Evaluation of the Vendor 

Frequency Frequency Percent 

Monthly 40 16.0 

Quarterly 140 56.0 

Half yearly 60 24.0 

Yearly 10 4.0 

Total 250 100.0 



 

 

 

The frequency of performance 

evaluation of the vendor divulges that 16 

percent of the firms are evaluated the 

performance on monthly basis, 56 percent 

are evaluated quarterly basis, 24 percent 

are evaluated half yearly basis and 4 

percent are evaluated annual basis 

 

Table - 6 

Satisfaction with HR Outsourcing 

Level of Satisfaction Frequency Percent 

Highly satisfied 46 18.4 

Satisfied 69 27.6 

Neutral 88 35.2 

Dissatisfied 44 17.6 

Highly dissatisfied 3 1.2 

Total 250 100.0 

   

 

The level of satisfaction with 

HR outsourcing portrays that 18.4 

percent are highly satisfied with HR 

outsourcing, 27.4 percent are satisfied, 

35.2 percent are neutral, 17.6 percent are 

dissatisfied and 1.2 percent are highly 

dissatisfied with the HR outsourcing 

 

FINDINGS, SUGGESTIONS AND 

CONCLUSION 

 
1. MAJOR FINDINGS OF THE 

STUDY 

 
 The category of the manufacturing 

industries reveal that 28 percent 

are electrical equipment 

manufacturers followed by 20 

percent is computer & electronics 

manufacturers. 

 

 The size of the organisation shows 

that 44 percent are medium size 

organisations and 36 percent are 

small size organisations. 

 

 The age of the organisation 

indicates that 48 percent of the 

sample manufacturing industries 

are functioning more than 15 

years, followed by 32 percent are 

6 to10 years. 

 The number of employees 

working in manufacturing 

industries reveals that 56 percent 

of the manufacturing industries 

are employed below 250 

employees and 32 percent of the 

industries are employed ranges 

between 200-500 employees. 

 

 The annual turnover of the 

manufacturing industries reveals 

that the annual turnover of 36 

percent of the manufacturing 

industries are below 25 lakhs and 

annual turnover of 36 percent is 

25-50 lakhs. 

 

2. CONCLUSION 

 

In the current hyper-competitive 

business environment, HR outsourcing is 

a strategic approach for the success of an 

organisation including manufacturing 

sector. In this study, the researcher has 

vigilantly analysed the effect of HR 

outsourcing in the performance of 

manufacturing industries in Bangalore. 

The study identified that the HR 

outsourcing is highly influenced in the 

areas of greater focus on core business, 

cost reduction, quality improvement, 

better financial performance, increase in 



 

 

revenue, business growth and enhanced 

organisational performance and 

operational performance. Hence, the firm 

characteristics has significantly 

influenced on the impact of HR 

outsourcing. In fact, HR outsourcing 

plays a significant role in the performance 

of the manufacturing industries as 

revealed by the overall findings of this 

study. The study also identified that 

employees’ viewpoint the HR 

outsourcing has positively influenced in 

the areas of team work, reward 

recognition, commitment, competency, 

involvement, management effectiveness 

and goal setting. The findings and 

suggestions made in this study will 

enormously assist as an eye-opener for 

manufacturing industries and if these 

findings and suggestions are executed by 

the manufacturing industries in letter and 

spirit, it will immensely help the 

manufacturing industries to sustain in the 

competitive environment forever. 

3. SUGGESTIONS 
 

Based on the findings of study, 

the following suggestions have been 

offered by the researcher to adopt and 

manage the outsourcing strategy 

effectively and also overcome the 

issues in the HR outsourcing. 
 

 Majority of the manufacturing 

firms are partially outsourced 

its HR functions. So, the firms 

should outsource their rest of 

HR functions to curtail 

operational costs by reducing 

HR expenses. Hence, the HR 

managers should focus firm’s 

cost pressures, pay leadership 

strategy before thinking of HR 

outsourcing. 
 

 The sample manufacturing 

units are selected a vendor for 

HR outsourcing based on cost 

effectiveness instead of that 

the firms should gauge the 

area of vendor’s expertise in 

the HR services prior to take 

decision of outsourcing their 

HR functions. Hence, firms 

must observe quality of 

services and the capability of 

vendors to provide HR 

services effectively along with 

their ability to streamline 

company’s HR functions. 
 

 Some of the sample 

manufacturing firms are 

changed the vendor due to 

high cost followed by poor 

quality of services. So, the 

firms should outsource certain 

part of HR activity initially, to 

identify the impact and 

appropriateness with their 

business goals, if they get 

satisfied with the expected 

results, the firm can proceed 

further. Hence, the vendors 

should be provided high 

quality of services at 

affordable cost to avoid 

termination of service 

contracts. 
 

 In the cut-throat competitive 

era, it is difficult for a firm to 

hire and retain all necessary 

human talents. So, initially the 

firms should assess the talent 

shortage which organization 

finds to fill up. The service 

providers must be hired 

keeping in mind the wants of 

the firm to compensate 

internal talent deficit. Hence, 

HR 

outsourcing can be resorted to 

as a strategic choice to make 

up of dearth of in-house 

talents. 

 

 
 

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