Conceptualising HR outsourcing effectiveness and scale development of HROSERVPERF using PLS-SEM

Purpose: This study aims to provide a conceptualisation of HR outsourcing (HRO) effectiveness from a service quality perspective and subsequently develop a scale – HROSERVPERF to measure HRO service performance underpinned S-O-R theory. Design/methodology/approach: Grounded on theoretical conceptualisation, literature and information collected through semi-structured interviews, HRO service performance items pool were generated. 257 responses from manufacturing firms in Malaysia that have outsourced their HR were collected. PLS-SEM is used for scale confirmation and validation. Findings: The conceptualisation of HRO effectiveness and HRO service performance suggests a need for scale development that encompasses service quality-satisfaction-loyalty framework supported by S-O-R theory. Operational improvement, resource alignment and service delivery emerged as the service performance dimensions of HROSERVPERF. Research limitations/implications: This study was limited to manufacturing firms in Malaysia, hence little generalisation could be drawn beyond this context. However, this serves as future research opportunities. Practical implications: HR managers and service providers can employ HROSERVPERF to measure and improve HRO service performance more effectively. Service providers can re-strategise and target their scarce resources to better retain their clients. Originality/value: This is the first paper that provides HRO effectiveness conceptualisation from a service quality perspective followed by a scale development with formative measures using PLS-SEM underpinned S-O-R theory.