Transforming the HR function through outsourced shared services: insights from the public sector

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14 Citations (Scopus)

Abstract

Shared services arrangements have been increasing in prominence in the human resource (HR) field. Whilst much of the existing HR literature has focused on internally managed shared services arrangements, this paper reports on the experiences of a public sector organisation that established an outsourced HR shared services arrangement. Using the theoretical underpinnings of the resource-based view of the firm, transaction cost economics as well as organisational change the paper provides insights into how a public sector organisation implemented an outsourced HR shared services arrangement. The key findings from the study illustrated that whilst organisations may benefit from using external vendors to provide HR shared services arrangements, to truly facilitate the achievement of a HR function, which is able to make a strategic contribution to the organisation, they need to ensure that key internal stakeholders are fully engaged with throughout the process.
LanguageEnglish
Pages1685-1707
JournalInternational Journal of Human Resource Management
Volume24
Issue number8
DOIs
Publication statusPublished - 1 Mar 2013

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Personnel
Shared services
Public sector
Human resources
Economics
Costs
Public sector organizations

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@article{c8ffa75fbdd14c9b832ed7603862a2e7,
title = "Transforming the HR function through outsourced shared services: insights from the public sector",
abstract = "Shared services arrangements have been increasing in prominence in the human resource (HR) field. Whilst much of the existing HR literature has focused on internally managed shared services arrangements, this paper reports on the experiences of a public sector organisation that established an outsourced HR shared services arrangement. Using the theoretical underpinnings of the resource-based view of the firm, transaction cost economics as well as organisational change the paper provides insights into how a public sector organisation implemented an outsourced HR shared services arrangement. The key findings from the study illustrated that whilst organisations may benefit from using external vendors to provide HR shared services arrangements, to truly facilitate the achievement of a HR function, which is able to make a strategic contribution to the organisation, they need to ensure that key internal stakeholders are fully engaged with throughout the process.",
author = "Martin McCracken and Ronan McIvor",
note = "Reference text: Agocs, C. (1997), ‘Institutionalized Resistance to Organizational Change: Denial, Inaction and Repression,’ Journal of Business Ethics, 16, 917–931. Alewell, D., Hauff, S., Thommes, K., and Weiland, K. (2009), ‘Triggers of HR Outsourcing Decisions – An Empirical Analysis of German Firms,’ The International Journal of Human Resource Management, 20, 1599–1617. Beer, M. (1997), ‘The Transformation of the Human Resource Function: Resolving the Tension Between the Traditional Administrative and a New Strategic Role,’ Human Resource Management, 36, 49–56. Bond, S., and McCracken, M. (2005), ‘The Importance of Training in Operationalising HR Policy,’ Journal of European Industrial Training, 29, 246–260. Brandl, J., Toft Madsen, M., and Madsen, H. (2009), ‘The Perceived Importance of HR Duties to Danish Line Managers,’ Human Resource Management Journal, 19, 194–210. Butler, M.G., Callahan, C.M., and Smith, R.E. (2010), ‘Human Resource Outsourcing: Long Term Operating Performance Effects From the Providers Perspective,’ Journal of Applied Business Research, 26, 77–85. Buyens, D., and De Vos, A. (2001), ‘Perceptions of the Value of the HR Function,’ Human Resource Management Journal, 11, 70–89. Carrig, K. (1997), ‘Reshaping Human Resources for the Next Century – Lessons From a High Flying Airline,’ Human Resource Management, 36, 277–289. Chiang, F.T., Hau-Siu Chow, I., and Birtch, T.A. (2010), ‘Examining Human Resource Management Outsourcing in Hong Kong,’ The International Journal of Human Resource Management, 21, 2762–2777. Conner, K.R. (1991), ‘A Historical Comparison of Resource-Based View and Five Schools of Thought Within Industrial Organization Economics: Do We have a New Theory of the Firm?’ Journal of Management, 17, 121–154. Conway, E., and Monks, K. (2008), ‘The Devolution of HRM to Middle Managers in the Irish Health Service,’ Personnel Review, 39, 361–374. Cooke, F.L. (2006), ‘Modeling an HR Shared Services Center: Experience of an MNC in the United Kingdom,’ Human Resource Management, 45, 211–227. Dany, F., Guiedri, Z., and Hatt, F. (2008), ‘New Insights Into the Link Between HRM Integration and Organizational Performance: The Moderating Role of Influence Distribution Between HRM Specialists and Line Managers,’ The International Journal of Human Resource Management, 19, 2095–2112. Davenport, T.H. (2005), ‘The Coming Commoditization of Processes,’ Harvard Business Review, 83, 100–108. Delmotte, J., and Sels, L. (2008), ‘HR Outsourcing: Threat or Opportunity?’ Personnel Review, 37, 543–563. Dess, G., Rasheed, M., McLaughlin, K., and Priem, R. (1995), ‘The New Corporate Architecture,’ Academy of Management Executive, 9, 7–18. Donaldson, T., and Preston, L.E. (1995), ‘The Stakeholder Theory of the Corporation: Concepts, Evidence and Implications,’ Academy of Management Review, 20, 65–91. The International Journal of Human Resource Management 1705 Downloaded by [University of Ulster at Coleraine] at 02:24 26 March 2013 Farndale, E., Paauwe, J., and Boselie, P. (2010), ‘An Exploratory Study of Governance in the Intra- Firm Human Resources Supply Chain,’ Human Resource Management, 49, 849–868. Farndale, E., Paauwe, J., and Hoeksema, L. (2009), ‘In-Sourcing HR: Shared Service Centres in the Netherlands,’ The International Journal of Human Resource Management, 20, 544–556. Feeny, D., Lacity, M., and Willcocks, L.P. (2005), ‘Taking the Measure of Outsourcing Providers,’ MIT Sloan Management Review, 46, 41–48. Forst, L. (2001), ‘Shared Services Grows Up,’ Journal of Business Strategy, 22, 13–15. Gibbs, G.R. (2002), Qualitative Data Analysis: Explorations with NVivo, Buckingham: Open University Press. Hagel, J., and Brown, J.S. (2005), The Only Sustainable Edge: Why Business Strategy Depends on Productive Friction and Dynamic Specialization, Boston, MA: Harvard Business School Press. Hesketh, A. (2008), ‘Industry Insight: Should it Stay or Should it go? Examining the Shared Services or Outsourcing Decisions,’ Strategic Outsourcing: An International Journal, 1, 154–172. Hunter, W., and Renwick, D. (2009), ‘Involving British Line Managers in HRM in a Small Non- Profit Work Organization,’ Employee Relations, 31, 398–411. Klaas, B.S. (2008), ‘Outsourcing and the HR Function: An Examination of Trends and Developments Within North American Firms,’ The International Journal of Human Resource Management, 19, 1500–1514. Klaas, B.S., McClendon, J.A., and Gainey, T.W. (2001), ‘Outsourcing HR: The Impact of Organizational Characteristics,’ Human Resource Management, 40, 125–138. Kotter, J. (2007), ‘Leading Change: Why Transformation Efforts Fail,’ Harvard Business Review, 85, 1, 96–103. Kulik, C.T., and Perry, E.L. (2008), ‘When Less is More: The Effect Of Devolution on HR’s Strategic Role and Construed Image,’ Human Resource Management, 47, 541–558. Lengnick-Hall, M., Lengnick-Hall, C., Andrade, L.S., and Drake, B. (2009), ‘Strategic Human Resource Management: The Evolution of the Field,’ Human Resource Management Review, 19, 64–85. Lepak, D.P., Bartol, K.M., and Erhardt, N.L. (2005), ‘A Contingency Framework for the Delivery of HR Practices,’ Human Resource Management Review, 15, 139–159. Maatman, M., Bondarouk, T., and Looise, J.K. (2010), ‘Conceptualising the Capabilities and Value Creation of HRM Shared Service Models,’ Human Resource Management Review, 20, 327–339. McConville, T. (2006), ‘Devolved HRM Responsibilities, Middle-Managers and Role Dissonance,’ Personnel Review, 35, 637–653. McCracken, M., and Heaton, N. (2012), ‘From “Tucked Away” to “Joined at the Hip”: Understanding the Evolving Relationships Within the HRBP Model in a Regional Energy Company,’ Human Resource Management Journal, 22, 182–198. McGuire, D., Stoner, L., and Mylona, S. (2008), ‘The Role of Line Managers as Human Resource Agents in Fostering Organizational Change in Public Sector Services,’ Journal of Change Management, 8, 73–84. McIvor, R. (2008), ‘What is the Right Outsourcing Strategy for Your Process,’ European Management Journal, 26, 24–34. McIvor, R. (2010), Global Services Outsourcing, Cambridge: Cambridge University Press. Mellewigt, T., Madhok, A., and Weibel, A. (2007), ‘Trust and Formal Contracts in Interorganizational Relationships – Substitutes and Complements,’ Managerial and Decision Economics, 28, 833–847. Oshima, M., Kao, T., and Tower, J. (2005), ‘Achieving Post-Outsourcing Success,’ Human Resource Planning, 28, 7–11. Pardo del Val, M., and Fuentes, C.M. (2003), ‘Resistance to Change: A Literature Review and Empirical Study,’ Management Decision, 41, 148–155. Peteraf, M.A. (1993), ‘The Cornerstones of Competitive Advantage: A Resource-Based View,’ Strategic Management Journal, 14, 179–191. Poppo, L., and Zenger, T. (2002), ‘Do Formal Contracts and Relational Governance Function as Substitutes or Complements,’ Strategic Management Journal, 23, 707–725. Pritchard, K. (2010), ‘Becoming an HR Strategic Partner: Tales of Transition,’ Human Resource Management Journal, 20, 175–188. 1706 M. McCracken and R. McIvor Downloaded by [University of Ulster at Coleraine] at 02:24 26 March 2013 Purcell, J., and Hutchinson, S. (2007), ‘Front-Line Managers as Agents in the HRM-Performance Causal Chain: Theory, Analysis and Evidence,’ Human Resource Management Journal, 17, 3–20. Quinn, B., Cooke, R., and Kris, A. (2000), Shared Services: Mining for Corporate Gold, Harlow: Pearson Education. Redman, T., Snape, E., Wass, J., and Hamilton, P. (2007), ‘Evaluating the Human Resource Shared Services Model: Evidence From the NHS,’ The International Journal of Human Resource Management, 18, 1486–1506. Reilly, P. (2000), ‘HR Shared Services and the Realignment of HR,’ Institute of Employment Studies Report 368, IES, Brighton. Reilly, P., and Pickard, J. (2000), ‘HR Service Centres: Called to Question,’ People Management, 6 July, 36. Reilly, P., and Williams, T. (2003), How to Get the Best Value From HR: The Shared Service Option, Aldershot: Gower. Sako, M., and Tierney, A. (2007), The Future of HR: How Human Resource Outsourcing is Transforming the HR Function, Executive Briefing, London: Advanced Institute of Management Research. Smith, A. (2006), ‘Overcoming Four HR Outsourcing Obstacles,’ Strategic HR Review, 5, 28–31. Teece, D.J., Pisano, G., and Shuen, A. (1997), ‘Dynamic Capabilities and Strategic Management,’ Strategic Management Journal, 18, 509–534. Teo, S.T.T., and Rodwell, J.J. (2007), ‘To be Strategic in the New Public Sector, HR must Remember Its Operational Activities,’ Human Resource Management, 46, 265–284. Ulrich, D., and Beatty, D. (2001), ‘From Partners to Players: Extending the HR Playing Field,’ Human Resource Management, 40, 293–307. Ulrich, D., Younger, J., and Brockbank, W. (2008), ‘The Twenty-First-Century HR Organization,’ Human Resource Management, 47, 829–850. Weatherly, L.A. (2005), ‘HR Outsourcing: Reaping Strategic Value for Your Organization,’ Society for Human Resource Management, Research Quarterly, 3, 1–11. Williamson, O. (1975), Market and Hierarchies: Analysis and Antitrust Implications, New York: Free Press. Williamson, O. (1991), ‘Comparative Economic Organisation: The Analysis of Discrete Structural Alternatives,’ Administrative Science Quarterly, 36, 269–296. Woodall, J., Scott-Jackson, W., Newham, T., and Gurney, M. (2009), ‘Making the Decision to Outsource Human Resources,’ Personnel Review, 38, 236–252. Wright, C. (2008), ‘Reinventing Human Resource Management: Business Partners, Internal Consultants and the Limits to Professionalization,’ Human Relations, 61, 1063–1086. Yin, R.K. (2009), Case Study Research: Design and Methods (4th ed.), Thousand Oaks, CA: Sage. The International Journal of Human Resource Management 1707 Downloaded",
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N1 - Reference text: Agocs, C. (1997), ‘Institutionalized Resistance to Organizational Change: Denial, Inaction and Repression,’ Journal of Business Ethics, 16, 917–931. Alewell, D., Hauff, S., Thommes, K., and Weiland, K. (2009), ‘Triggers of HR Outsourcing Decisions – An Empirical Analysis of German Firms,’ The International Journal of Human Resource Management, 20, 1599–1617. Beer, M. (1997), ‘The Transformation of the Human Resource Function: Resolving the Tension Between the Traditional Administrative and a New Strategic Role,’ Human Resource Management, 36, 49–56. Bond, S., and McCracken, M. (2005), ‘The Importance of Training in Operationalising HR Policy,’ Journal of European Industrial Training, 29, 246–260. Brandl, J., Toft Madsen, M., and Madsen, H. (2009), ‘The Perceived Importance of HR Duties to Danish Line Managers,’ Human Resource Management Journal, 19, 194–210. Butler, M.G., Callahan, C.M., and Smith, R.E. (2010), ‘Human Resource Outsourcing: Long Term Operating Performance Effects From the Providers Perspective,’ Journal of Applied Business Research, 26, 77–85. Buyens, D., and De Vos, A. (2001), ‘Perceptions of the Value of the HR Function,’ Human Resource Management Journal, 11, 70–89. Carrig, K. (1997), ‘Reshaping Human Resources for the Next Century – Lessons From a High Flying Airline,’ Human Resource Management, 36, 277–289. Chiang, F.T., Hau-Siu Chow, I., and Birtch, T.A. (2010), ‘Examining Human Resource Management Outsourcing in Hong Kong,’ The International Journal of Human Resource Management, 21, 2762–2777. Conner, K.R. (1991), ‘A Historical Comparison of Resource-Based View and Five Schools of Thought Within Industrial Organization Economics: Do We have a New Theory of the Firm?’ Journal of Management, 17, 121–154. Conway, E., and Monks, K. (2008), ‘The Devolution of HRM to Middle Managers in the Irish Health Service,’ Personnel Review, 39, 361–374. Cooke, F.L. (2006), ‘Modeling an HR Shared Services Center: Experience of an MNC in the United Kingdom,’ Human Resource Management, 45, 211–227. Dany, F., Guiedri, Z., and Hatt, F. (2008), ‘New Insights Into the Link Between HRM Integration and Organizational Performance: The Moderating Role of Influence Distribution Between HRM Specialists and Line Managers,’ The International Journal of Human Resource Management, 19, 2095–2112. Davenport, T.H. (2005), ‘The Coming Commoditization of Processes,’ Harvard Business Review, 83, 100–108. Delmotte, J., and Sels, L. (2008), ‘HR Outsourcing: Threat or Opportunity?’ Personnel Review, 37, 543–563. Dess, G., Rasheed, M., McLaughlin, K., and Priem, R. (1995), ‘The New Corporate Architecture,’ Academy of Management Executive, 9, 7–18. Donaldson, T., and Preston, L.E. (1995), ‘The Stakeholder Theory of the Corporation: Concepts, Evidence and Implications,’ Academy of Management Review, 20, 65–91. The International Journal of Human Resource Management 1705 Downloaded by [University of Ulster at Coleraine] at 02:24 26 March 2013 Farndale, E., Paauwe, J., and Boselie, P. (2010), ‘An Exploratory Study of Governance in the Intra- Firm Human Resources Supply Chain,’ Human Resource Management, 49, 849–868. Farndale, E., Paauwe, J., and Hoeksema, L. (2009), ‘In-Sourcing HR: Shared Service Centres in the Netherlands,’ The International Journal of Human Resource Management, 20, 544–556. Feeny, D., Lacity, M., and Willcocks, L.P. (2005), ‘Taking the Measure of Outsourcing Providers,’ MIT Sloan Management Review, 46, 41–48. Forst, L. (2001), ‘Shared Services Grows Up,’ Journal of Business Strategy, 22, 13–15. Gibbs, G.R. (2002), Qualitative Data Analysis: Explorations with NVivo, Buckingham: Open University Press. Hagel, J., and Brown, J.S. (2005), The Only Sustainable Edge: Why Business Strategy Depends on Productive Friction and Dynamic Specialization, Boston, MA: Harvard Business School Press. Hesketh, A. (2008), ‘Industry Insight: Should it Stay or Should it go? Examining the Shared Services or Outsourcing Decisions,’ Strategic Outsourcing: An International Journal, 1, 154–172. Hunter, W., and Renwick, D. (2009), ‘Involving British Line Managers in HRM in a Small Non- Profit Work Organization,’ Employee Relations, 31, 398–411. Klaas, B.S. (2008), ‘Outsourcing and the HR Function: An Examination of Trends and Developments Within North American Firms,’ The International Journal of Human Resource Management, 19, 1500–1514. Klaas, B.S., McClendon, J.A., and Gainey, T.W. (2001), ‘Outsourcing HR: The Impact of Organizational Characteristics,’ Human Resource Management, 40, 125–138. Kotter, J. (2007), ‘Leading Change: Why Transformation Efforts Fail,’ Harvard Business Review, 85, 1, 96–103. Kulik, C.T., and Perry, E.L. (2008), ‘When Less is More: The Effect Of Devolution on HR’s Strategic Role and Construed Image,’ Human Resource Management, 47, 541–558. Lengnick-Hall, M., Lengnick-Hall, C., Andrade, L.S., and Drake, B. (2009), ‘Strategic Human Resource Management: The Evolution of the Field,’ Human Resource Management Review, 19, 64–85. Lepak, D.P., Bartol, K.M., and Erhardt, N.L. (2005), ‘A Contingency Framework for the Delivery of HR Practices,’ Human Resource Management Review, 15, 139–159. Maatman, M., Bondarouk, T., and Looise, J.K. (2010), ‘Conceptualising the Capabilities and Value Creation of HRM Shared Service Models,’ Human Resource Management Review, 20, 327–339. McConville, T. (2006), ‘Devolved HRM Responsibilities, Middle-Managers and Role Dissonance,’ Personnel Review, 35, 637–653. McCracken, M., and Heaton, N. (2012), ‘From “Tucked Away” to “Joined at the Hip”: Understanding the Evolving Relationships Within the HRBP Model in a Regional Energy Company,’ Human Resource Management Journal, 22, 182–198. McGuire, D., Stoner, L., and Mylona, S. (2008), ‘The Role of Line Managers as Human Resource Agents in Fostering Organizational Change in Public Sector Services,’ Journal of Change Management, 8, 73–84. McIvor, R. (2008), ‘What is the Right Outsourcing Strategy for Your Process,’ European Management Journal, 26, 24–34. McIvor, R. (2010), Global Services Outsourcing, Cambridge: Cambridge University Press. Mellewigt, T., Madhok, A., and Weibel, A. (2007), ‘Trust and Formal Contracts in Interorganizational Relationships – Substitutes and Complements,’ Managerial and Decision Economics, 28, 833–847. Oshima, M., Kao, T., and Tower, J. (2005), ‘Achieving Post-Outsourcing Success,’ Human Resource Planning, 28, 7–11. Pardo del Val, M., and Fuentes, C.M. (2003), ‘Resistance to Change: A Literature Review and Empirical Study,’ Management Decision, 41, 148–155. Peteraf, M.A. (1993), ‘The Cornerstones of Competitive Advantage: A Resource-Based View,’ Strategic Management Journal, 14, 179–191. Poppo, L., and Zenger, T. (2002), ‘Do Formal Contracts and Relational Governance Function as Substitutes or Complements,’ Strategic Management Journal, 23, 707–725. Pritchard, K. (2010), ‘Becoming an HR Strategic Partner: Tales of Transition,’ Human Resource Management Journal, 20, 175–188. 1706 M. McCracken and R. McIvor Downloaded by [University of Ulster at Coleraine] at 02:24 26 March 2013 Purcell, J., and Hutchinson, S. (2007), ‘Front-Line Managers as Agents in the HRM-Performance Causal Chain: Theory, Analysis and Evidence,’ Human Resource Management Journal, 17, 3–20. Quinn, B., Cooke, R., and Kris, A. (2000), Shared Services: Mining for Corporate Gold, Harlow: Pearson Education. Redman, T., Snape, E., Wass, J., and Hamilton, P. (2007), ‘Evaluating the Human Resource Shared Services Model: Evidence From the NHS,’ The International Journal of Human Resource Management, 18, 1486–1506. Reilly, P. (2000), ‘HR Shared Services and the Realignment of HR,’ Institute of Employment Studies Report 368, IES, Brighton. Reilly, P., and Pickard, J. (2000), ‘HR Service Centres: Called to Question,’ People Management, 6 July, 36. Reilly, P., and Williams, T. (2003), How to Get the Best Value From HR: The Shared Service Option, Aldershot: Gower. Sako, M., and Tierney, A. (2007), The Future of HR: How Human Resource Outsourcing is Transforming the HR Function, Executive Briefing, London: Advanced Institute of Management Research. Smith, A. (2006), ‘Overcoming Four HR Outsourcing Obstacles,’ Strategic HR Review, 5, 28–31. Teece, D.J., Pisano, G., and Shuen, A. (1997), ‘Dynamic Capabilities and Strategic Management,’ Strategic Management Journal, 18, 509–534. Teo, S.T.T., and Rodwell, J.J. (2007), ‘To be Strategic in the New Public Sector, HR must Remember Its Operational Activities,’ Human Resource Management, 46, 265–284. Ulrich, D., and Beatty, D. (2001), ‘From Partners to Players: Extending the HR Playing Field,’ Human Resource Management, 40, 293–307. Ulrich, D., Younger, J., and Brockbank, W. (2008), ‘The Twenty-First-Century HR Organization,’ Human Resource Management, 47, 829–850. Weatherly, L.A. (2005), ‘HR Outsourcing: Reaping Strategic Value for Your Organization,’ Society for Human Resource Management, Research Quarterly, 3, 1–11. Williamson, O. (1975), Market and Hierarchies: Analysis and Antitrust Implications, New York: Free Press. Williamson, O. (1991), ‘Comparative Economic Organisation: The Analysis of Discrete Structural Alternatives,’ Administrative Science Quarterly, 36, 269–296. Woodall, J., Scott-Jackson, W., Newham, T., and Gurney, M. (2009), ‘Making the Decision to Outsource Human Resources,’ Personnel Review, 38, 236–252. Wright, C. (2008), ‘Reinventing Human Resource Management: Business Partners, Internal Consultants and the Limits to Professionalization,’ Human Relations, 61, 1063–1086. Yin, R.K. (2009), Case Study Research: Design and Methods (4th ed.), Thousand Oaks, CA: Sage. The International Journal of Human Resource Management 1707 Downloaded

PY - 2013/3/1

Y1 - 2013/3/1

N2 - Shared services arrangements have been increasing in prominence in the human resource (HR) field. Whilst much of the existing HR literature has focused on internally managed shared services arrangements, this paper reports on the experiences of a public sector organisation that established an outsourced HR shared services arrangement. Using the theoretical underpinnings of the resource-based view of the firm, transaction cost economics as well as organisational change the paper provides insights into how a public sector organisation implemented an outsourced HR shared services arrangement. The key findings from the study illustrated that whilst organisations may benefit from using external vendors to provide HR shared services arrangements, to truly facilitate the achievement of a HR function, which is able to make a strategic contribution to the organisation, they need to ensure that key internal stakeholders are fully engaged with throughout the process.

AB - Shared services arrangements have been increasing in prominence in the human resource (HR) field. Whilst much of the existing HR literature has focused on internally managed shared services arrangements, this paper reports on the experiences of a public sector organisation that established an outsourced HR shared services arrangement. Using the theoretical underpinnings of the resource-based view of the firm, transaction cost economics as well as organisational change the paper provides insights into how a public sector organisation implemented an outsourced HR shared services arrangement. The key findings from the study illustrated that whilst organisations may benefit from using external vendors to provide HR shared services arrangements, to truly facilitate the achievement of a HR function, which is able to make a strategic contribution to the organisation, they need to ensure that key internal stakeholders are fully engaged with throughout the process.

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DO - 10.1080/09585192.2012.725070

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VL - 24

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JO - International Journal of Human Resource Management

T2 - International Journal of Human Resource Management

JF - International Journal of Human Resource Management

SN - 0958-5192

IS - 8

ER -