Human Resource Management Outsourcing Adoption Among Chinese SMEs Dissertation

Human Resource Management Outsourcing Adoption Among Chinese SMEs - Dissertation Example All four objectives have been achieved. The study finds that the drivers of HRMO adoption at the Chinese SMEs include lack of expertise, cost savings (although they lack the in-depth knowledge of cost calculations), political factors such as labour laws, and lack of internal capability. Basing their decisions on the transaction cost theory, the SMEs recognize that outsourcing offers advantages such as economies of scale and access to expertise. This has enhanced the adoption of HRMO among the Chinese SMEs. However, despite some amount of adoption, the SMEs in this study demonstrate their incapability and inefficiency in managing HR outsourcing and in HRMO adoption. They acknowledge that they lack the resources and capabilities which also reflect in the vendor selection process. Those that have not outsourced express lack of confidence on the vendors’ quality or their firm size does not justify the costs of outsourcing. The SMEs are unable to anticipate their needs as well as t he contingencies. The SMEs are reluctant to outsource because of lack of trust on the vendors’ abilities, firm-specific knowledge (which gives rise to lack of trust), fear of opportunism, and lack of negotiating skills. The SMEs do not have the expertise to evaluate the contractors; they do not appear to have the expertise to evaluate the risk-bearing costs, essential to managing contracts of outsourcing. The study suggests that the cultural influence has been the biggest barrier to HRMO adoption among the Chinese SMEs but along with it political and economic factors are equally responsible. With the western influence, SMEs in China do recognize that they need to change their strategy but appear to be unsure of their decisions. Or they may be reluctant to accept responsibility for their decisions. In light of the above, recommendation for an HRMO strategy for the SMEs in China has been made. The model suggests initial identification of needs, assessing and comparing of intern al and external capabilities are ore-requisites. Recruitment and selection being the key concern of the SMEs, these should be outsourced to POEs or head hunters who have the necessary skills. Another key criterion that SMEs have to focus on is on evaluating the agent prior to signing the contract. Support of government should be taken to identify the right agent. Before signing the contract cost evaluation is vital which includes costs not just related to the actual work but unforeseen costs such as monitoring costs, termination costs, control costs. The agent should function as an extension of the organization and work in cohesion with the principal. The relationship should be build with a long-term focus which also helps control costs. The study concludes by highlighting the limitations and recommending areas for further study. Table of Contents Chapter One: Introduction 1.1 Research Background 1 1.2 Rationale for the Study 2 1.3 Research objectives 2 1.4 Organization of the Study 3 Chapter Two: Literature Review 2.1 Introduction 4 2.2. Definitions and Background Overview 2.2.1. Definition of SME 4 2.2.2. SMEs’ in China 5 2.2.3 HRM Functions (Human Resources Management) 6 2.2.4 Outsourcing 6 2.3 HRM Outsourcing 7 2.3.1 Rationale for HRM outsourcing 8 2.4 Economic Theories underpinning Outsourcing 2.4.1 Transaction Cost Economies 9 2.4.2 Principal-agent Theory 11 2.4.3 Porter’s Value Chain Framework 12 2.5 SMEs and HRM outsourcing 13 2.6 Advantage