At the present, firms are increasingly using outsourcing of services to improve the firm’s effectiveness, productivity, profitability, quality of products, quality workforce. Private sector expenditure is substantial. Owing to the enormous amount of money involved and the fact that the money comes from the private stakeholders and business, thus, they demand accountability and efficiency. The general objective of this study was to examine the effects of outsourcing on organizational performance. Specific Objectives were to examine the effect of outsource financial activities and outsource human resource activities.The study was anchored by two theories, Resource-Based View Theory and Principal Agent Theory. Explanatory research design was utilized in this study. Data was collected from a sample of 81 respondents from the private sector manufacturing companies translating to a response rate of 90%. A likert scale type of questionnaire was used to solicit primary data. The data analysis methods used were descriptive and inferential statistics, utilizing a multiple regression analysis model. The study findings showed that outsourced HR activities has significant effects on firm performance. However, outsourced finance and accounts activities have no significant effect on firm performance. The study concludes that outsourcing HR functions may be the best pathway to cost savings especially if effective HR activities already do exists in the organization. There is therefore need for firms to recruit using recruitment bureaus since it attracts the most qualified, competent and talented employees, not to outsource financial activities.
Keywords: Financial Activities and Human Resource Activities, Firm Performance
