The Mediating Effect of Vendor Relationship Management on the Nexus Between Human Resource Outsourcing Motivators and Employee Retention: Evidence from the Oil and Gas Sector in Kenya

Abstract

Vendor management is a key driver of human resource outsourcing outcomes; when mismanaged, it can raise the risk of failure by up to 50%, resulting in outsourced employee turnover, legal disputes, and a shift back to insourcing. In Kenya, human resource outsourcing is increasingly associated with labour challenges linked to vendor-managed employment arrangements, including unfair labour practices, discrimination, poor working conditions, and violations of employee rights. These concerns expose the vulnerability of outsourced workers and underscore the need for effective vendor management to enhance employee retention. This study examines the mediating role of vendor relationship management (VRM) in the nexus between human resource outsourcing (HRO) motivators and employee retention within Kenya’s oil and gas sector. Grounded in the Agency theory of outsourcing and inter-organizational governance, the study addresses vendor relationship management through the lense of vendor client contract and vendor expertise. Pragmatism philosophy guided the research, adopting a mixed methods design. The study targeted 219 oil and gas companies from a population of 430 firms, with a sample of 125 companies. Data was collected from 211 Heads of Human Resources and Procurement, yielding a response rate of 84.4 percent. Data analysis involved descriptive statistics and multiple regression analysis. Vendor relationship management demonstrated a significant partial mediation effect on the relationship between outsourcing drivers and employee retention (β = 0.261, p = 0.000) hence an indication that collaborative vendor engagement enhances the retention benefits associated with human resource outsourcing. The study findings highlight that oil and gas companies prioritize strong vendor relationship management practices characterized by robust vendor contracts that highlight vendor; service quality , expertise, scalability, responsibilities and expectations,  risk mitigation, service level agreement, continuos performance monitoring, and supportive communication channels that promote a employee retention. Additionally, policy makers and regulators should strengthen vendor governance by ; developing sector specific outsourcing guidelines, promoting equal pay for comparable work among outsourced and client staff. Finally align outsourcingng motivators with regulations, labour market dynamics and sector specific conditions that ultimately enhance outsourced employee retention and sustain specialized workforce capabilities in the oil and gas industry. The study is significant in advancing the understanding of vendor relationship management within human resource outsourcing, particularly in Kenya’s oil and gas sector. By examining the relationship between human resource outsourcing motivators, vendor relationship management, and outsourced employee retention within a single framework, the study provides empirical evidence on how effective vendor relationships influence employee retention outcomes. The findings will assist organizations and vendors in developing stronger partnerships that enhance outsourced employee retention.

Key words: Vendor Relationship Management, Human Resource Outsourcing Motivators , Employee Retention, Agency Theory ,Oil and Gas Sector

DOI: 10.7176/JRDM/97-04

Publication date: May 30^th 2026