Society For Human Resource Management (SHRM) Certified Professional Practice Exam

What differentiates outsourcing from off-shoring?

1. Outsourcing is about transferring work outside the country

2. Outsourcing entails moving work to groups outside one's payroll

3. Off-shoring entails moving a part of a business to an external entity in a nearby country

4. A and B

The correct answer is: Outsourcing entails moving work to groups outside one's payroll

Outsourcing specifically refers to the practice of contracting out certain business operations or functions to third-party organizations, which can be based either domestically or internationally. This approach focuses on moving specific tasks or services to external providers to gain efficiencies, reduce costs, or leverage specialized expertise. By this definition, the correct answer highlights that outsourcing involves moving work to groups that are not on a company's payroll. Off-shoring, on the other hand, refers to relocating certain business functions or processes to another country, often to take advantage of lower labor costs or different regulatory environments. While it may involve outsourcing as well, off-shoring is distinct in that it specifically denotes the geographical aspect of moving operations abroad. This understanding of outsourcing as a broader term than off-shoring helps clarify why the focus on moving work to groups outside of a company's payroll is the most accurate differentiation in the context of the question. The other options mix the definitions or misinterpret the geographical aspect of off-shoring, which creates confusion.