A Decision Model for Outsourcing Training Functions: Distinguishing between Generic and Firm/Job Specific Training Content

Abstract:     
Employee training plays a crucial role in the success of most organizations. Due to its developmental aspect, training is closely linked to core competencies and strategic focus. However, it is also one of the most widely outsourced HR functions in most western economies. This paper attempts to illustrate and proposes a decision model for the factors that shape the expected benefits and subsequently the extent of outsourcing training functions. A distinction is made among generic training (for the development of competencies) and job- or company- specific training (ex. induction training, job specialization etc.). Two decision models are extracted with structural equation modelling. Asset specificity, market availability, in-house development of training and firm size are discussed. The factors shaping the decision to outsource, as well as the perceived benefits from outsourcing employee training, are different for each of the two types of training (generic and specific). The reasons underlying those differences are discussed. For both types of training service it is proposed that the expected quality benefits, not cost ones, induce companies to outsource training. Thus, this study attempts to offer a useful insight into the factors shaping the extent and the expected benefits from outsourcing training services. The outcomes can further assist HRM professionals (managers and providers of HRM services), as well as academics in better understanding the nature of HRM outsourcing decisions in general, and a 'basic' HRM outsourcing practice, i.e. training, in particular.

Number of Pages in PDF File: 35

Keywords: training and development, decision making, core competencies, transaction

JEL Classification: M55, M53, M12

Accepted Paper Series