In present world of ever rising competition, firms have to seek for new means of generating value. Every firm globally is currently embracing outsourcing and firms have taken up its values to assist then enlarge into new markets. Planned managing of outsourcing is conceivably a very influential tool in administration, and outsourcing of modernism is its front line (Eluinn, 2000). Outsourcing is an administrative approach by which a firm delegates key, non-core tasks to expert and competent service providers. The conventional outsourcing emphasis on tactical advantages such as cost reduction (for instance, cheaper labor cost in some of the low-cost states), have more currently been substituted by efficiency, suppleness, speed as well as originality in the development of business functions, and accessibility of new technologies and skills. The marketplace for suppliers of outsourced functions of all kinds is expanding speedily. In 1996, businesses in America used up over $ 110 billion in these services. Other approximations place the total United States market for outsourcing at over $ 300 billion by 2001. Universally, outsourcing practice increased by about 35% in 1997 and the overall marketplace is anticipated to continue increasing. Throughout the past 20 years, the U.S. based firms have increasingly utilized outsourcing as a factor in attaining bottom line quantifiable success.
Outsourcing is considered to provide organizational leaders with a strategic course of action that influences a company’s financial performance. It influences a firm’s change processes. Outsourcing is distinctly diverse from contracting, in that it establishes “dramatic transformations in the nature of work, management and organizational design”. Outsourcing has also been described as a strategy for expanding a company’s market share into other areas. It is a growth strategy that offers organizational value away from cost savings and corresponds to a portal of achieving market growth. As stated by Kakabadse & Kakabadse (2005), outsourcing corresponds to a predetermined accord with an outside enterprise for the delivery of goods and services that managerial leadership determined not to accomplish in-house. Kakabadse and Kakabadse stated that outsourcing is a means by which firms obtain goods and services more efficiently rather that producing these goods and services on their own. The idea of managerial efficiency suggested that strategic outsourcing offers a methodology for companies to attain competitive advantage (Kakabadse & Kakabadse, 2005).
Practices in business as well as economic functions are continuously changing. Various industries have changed completely from the manual processes to the complex, automated and computerized technologies. Some researchers have documented that manufacturing industries have introduced sophisticated products that need operators with special skills. Furthermore, information communication technology usage and faster information distribution have change people’s way of life and the manner in which businesses are being operated. The requirements and desires of customers are making organizations to transform and reorganize for the purpose of ensuring that they sustain with the marketplace demands (Entrekin & Court, 2001). In addition, many companies are no longer as localized as they were initially. To compete in a global market, firms have had to transform for the purpose of sustaining growth. All these factors have forced firms to outsource in order to survive. This document therefore evaluates the impact of outsourcing on worker’s work attitude and dedication.
The significant extent of outsourcing services utilized through all business segments is included in literature (Eluinn, 2000). Past studies have progressed allow various parts. First, a number of researchers have paid attention on influences and grounds for outsourcing functionalities. Based on this viewpoint, the universal urgent for outsourcing increases as companies evolve from sellers of goods and services in foreign countries to the introduction businesses in other counties and staffing those businesses with host countries or the 3rd party states (Greer et al, 1999). A majority of businesses have a belief that so as to compete internationally, they have to consider competence and cost restraint instead of depending on increase in returns only (Corner & Prahalad, 1996). As firms seek to improve their competitive positions in a progressively more universal marketplace, they are realizing that they are capable of cutting charges and maintain value by utilizing the exterior service providers for tasks that are considered as complementary to their key dealings (Mullin, 1996). Researchers have recognized numerous outsourcing issues, tendencies and approaches that firms take in developing and effectively administrating their outsourcing activities. The tendency is for outsourcing connections to operate more as joint ventures. Outsourcing suppliers are taking more and more accountability in areas that have conventionally remained in-house, like business strategy, information administration, business venture as well as interior quality plans (Sinderman, 1995). A survey concerning the United States CEOs indicated that about 42% of communication companies, 40% computer manufacturers and about 37% of the semiconductor firms utilize much of global outsourcing. According to another survey carried out by Duncan and Groves-Rowan (1997), over 65% of banks investigated pointed out that they were already utilizing at least one kind of outsourcing function. The most frequently utilized outsourcing service in banking included levy, insolvency, cashiering as well as cover. Workforce costs operation were the key grounds for bank outsourcing, though; it also enhances in service effectiveness and minimizes operation fees.
There are numerous factors that influence organizational decisions to outsource human resource. The incidence of outsourcing has continued to increase globally. An example is the many Information Technology services being outsourced to India in the areas such as E-commerce, software manufacturing, networking systems, and digital and cartoon establishment (Johnson, 2007). Actually, India is dealing globally when it comes to outsourcing, benefiting from the strong repute in software and hardware outsourcing. The country is also a key source of software assembly for numerous firms worldwide. There are some proof indicating that about 82% of organizations in America, including major companies such as IBM and Accenture are depending on outsourcing Information Technology services from India because they offer high quality services (Muncaster, 2007). Apart from IT outsourcing, there are other popular outsourcing services offered from India and other regions worldwide. The market for outsourcing provider is continuously expanding for the reason that it is a means by which firms to generate value. With an outsourcing strategy, a firm is able to benefit from cost reduction. Even though asset costs are rising due to the impact of global financial crisis, firms can not raise their production cost as owing to the high level of competition in the present markets. It is essential for firms therefore to seek out approaches that lower asset costs. Outsourcing is viewed as a cost cutback approach, with firms having their non core competencies outsourced while retaining client service, and thus attaining a competitive advantage (Elmuti, 2003). On the other hand, some researchers argue that, there may be unhelpful long-standing outcomes of outsourcing which may result from a firm’s reliance on self-governing suppliers. This kind of dependence on outsourcing could make it intrinsically hard for a firm to keep up its long-standing competitive advantages without considering the developmental functionalities of the continually evolving design and the new technologies. A number of researchers have looked at the effects of expertise sourcing joint venture from the sourcing company’s perspective and it was discovered that, generally, equity-based alliances are more effective as compared to the contract-based outsourcing. According to Steensma and Corley (2000), the outcomes from skilled joint ventures for sourcing corporations depend on the contact between technology features and the relationship between resource and sourcing corporations.
There are studies that have focused on the efficiency outsourcing approach and its effect on organizational characteristics. Some of the studies suggest that, for an outsourcing approach to work well, firms must proactively control their outsourcing approaches through the establishment of a top administration commitment, universal sourcing structures and procedures and universal sourcing business capabilities. Additionally, the researches also suggest that firms that have not had their sourcing approach raised to universal, tactical level may by now be behind when it comes to quality, cost, delivery, expertise, performance and customer service. According to Klaas et al (2001), the influence of managerial character was extremely reliant, indicating that managerial characters have a variety of impacts on a diverse kinds of outsourcing functionalities outsourced. Per se, it seems that numerous features including disburse level, promotional services and demand uncertainly should be well thought-out when thinking of outsourcing activities. Some investigators have looked at outsourcing performance measures. For instance, Kotabe et al (1998), outlines three kinds of performance measures and essential elements in any performance measurement scheme. These include; strategic factors, financial factors as well as quality measures. Additional studies utilize further aspects of marketplace performance including costs cutbacks, cycle period, client fulfillment as well as efficiency for the purpose of determining the effectiveness of outsourcing approach. From a different view point, hindrances like wrong choices of sourcing associates, insufficient planning and skills required for the management of outsourcing activities and poor administration communication have also been outlined as affecting the successfulness of outsourcing projects.
The outsourcing tendency gained greater progress during the 1970-s, as many big and diverse firms were not performing so well during that time. This tendency increased rapidly early on in the 1980s as the universal recession was on its beginning stage. During the 1980s, there was a great transformation of the direction in business strategy and firms began thinking of outsourcing, however the key focus was on a smaller number of activities. The functionalities that were habitually being outsourced included clean-up IT, cookery and security. Currently, human resource activities have been extensively outsourced and this is the quickest growing sector over the past decade. Apart from cost saving as a key reason for outsourcing, studies have shown that the actual payoff from human resource outsourcing is not in cost saving but in improved quality. It has been explained that, the other factors influencing outsourcing include attaining specialized human resource expertise, attaining flexibility, minimizing risks and enhancement of the accessibility to new technology (Klaas et al, 2005). There are numerous theoretical as well as empirical research articles; however the academic literature concerning human resource outsourcing is minimal. The cost saving advantage is the common significant argument in the subject of human resource outsourcing. Various researchers in their works suggest that at the instant of making the decision to outsource, there should be some other aspects excluding cost which should be put into consideration. The other grounds for outsourcing that are outlined by researchers include specialized services, customer and employee satisfaction and gaining a competitive advantage. According to Adler (2003), an assessment by Granter group outlined 6 aspects which should be considered in decisions of outsourcing including reliance risks, spillover threats, trust, relative expertise, considered capabilities and flexibility. The first four of these aspects are temporary aspects, while the other two are regarded as the long term. However, in literature, there is no definite process of identifying when outsourcing is most resourceful and effectual.
Once a company has made a decision to outsource the specific functions, it is necessary that it looks for the best supplier for the specialized services. One supplier of services is better than multiple suppliers for several reasons. First, it is easier to monitor a single vendor as it saves time of the human resource staff. Secondly, one supplier understands well the requirements of a client and offers integrated solutions across the firm. Thirdly, it is more beneficial when several functions are acquired from a single dealer which allows a company to have a better accord. Klaas, who has researched on the impact of human resource outsourcing, discovered that firms should have a good understanding of the prospective dangers before choosing a human resource vendor. Klaas clarified that particularly the small and the medium businesses are hastily opting for human resource outsourcing. In addition, he stated that there are variables that may be affected by firms and usually vary from one firm to the other, which include the management fees, staff time costs, human resource results and compensation expenses. Klaas, suggested that if a firm is thinking of outsourcing the human resource functions, it should research these variables well to identify the benefits that could be obtained in contract to cost saving. There are a number of evidence indicating that the tendency of human resource outsourcing has continued to increase in other parts globally. For example, in Canada the expenses on human resource outsourcing has increased from $ 90 million in the year 2006 to about $ 2 billion in the year 2007, and it has continued growing rapidly. Additionally, there are studies that suggest that about 91% of firms are currently outsourcing their human resource activities and about 56% of firms will raise the number of outsourcing suppliers. This figure implies that there is a massive market this business and outsourcing suppliers should consider what they have to offer firms. The market for outsourcing the human resource function has risen quickly over the past ten years because the cost that is associated with outsourcing the human resource function can be reasonably priced and more efficient as compared to operating internal human resource activities.
Many firms decide to outsource several organizational functions for the reason that they want to focus on their major competencies and see low value in the development of the in-house activities outside this core. In particular, outsourcing the human resource activities can minimize the work load of the existing employees, thus, enabling a firm to mainly focus on strategic decision making and in the development of the key competencies. Outsourcing the human resource functions can enable managers to focus on their key business instead of spending valuable time on human resource activities that are considered more complex and advanced. According to Datar (2003), some internal functions of the human resource are not part of the key business and may be lastingly or temporarily be outsourced. For instance, recruitment is the most common human resource process to be outsourced. Recruitment experts have more sophisticated techniques, which includes numerous sourcing channels, websites and even recruitment software that can easily identify numerous applicants, and thus increasing the likelihood that the most suitable candidate for the job will be found. The increased complication and availability of information in the human resource is also extensively handled by external experts. Human resource software are very helpful when it comes to managing people. Stone verifies that such software have become an important mechanism that assist firms enhance productivity and maintain a competitive advantage. In addition, he argues that this software can incorporate essential human resource information and firm strategy (Stone, 2006).
This research will be conducted in two industrialized plants of a big, diversified, non-unionized, and multi-divisional company situated in an urban area in the U.S. These two plants which are situated within the same state, manufacture several electronic elements, measurement and control devices, control panels as well as auto parts elements. The first plant consist of an experimental group of persons who are involved in numerous types of outsourcing activities including improvement of their information technology capabilities, management of their logistics together with their supply chain, administration of the standard employee benefits among other activities. They were also involved in the execution of the outsourcing plan in their plant. The second plant consisted of a matched comparison group of persons who have not adopted the outsourcing functions for their plant and had no future plans of adopting such programs because of the internal environmental issues plus the highly effective association between labor and management which included employees involvement in decision making and having regular meetings between labor and the management.
The study will involve the use of feedback forms, archival data plus follow up interviews. The questionnaire is to be used to tap a variety of quality of work aspects, with measures drawn from the Michigan Organizational Assessment Package (MOAP) (Mowday et al, 1979). The MOAP have proved to have suitable levels of dependability and soundness across various settings. Responses are to be reported on seven-point scales that range from one as low to seven as high for all the measures. Elements of every studied quality of work life sectors are to be incorporated in the feedback form. Measures of involvement and interaction included in the questionnaire will be a self report of the frequency with which suggestion are provided at work, an item which assesses satisfaction with opportunities of taking part in decisions, scales of work team interaction. Measures of administration commitment are to be determined using a 15 item scale. Responses are to be reported on 7 point scale supported by powerfully agree and powerfully disagree. The population to be sampled is to comprise of all full-time employees in the two plants. There should be two surveys to finish up the research. One to be carried out at the research sites just before the execution of the outsourcing programs for the purpose of assessing the attitude of the employees and quality of work aspects generally in the two plants. The other survey is to be carried out one and half years after the program had started assessing any changes on the perception of employees. Various variables are to be identified, which includes the independent factors like cost, flexibility, dependability, quality, outsourcing functions as will as the provider power. Additional variables are to focus on the dependent factors such as firm’s output, aspects of the excellence of work, outsourcing aspects for the purpose of enhancing their reliability.
At the start of the study, the overall number of workers for the two experimental plant will be recorded and the overall number of workers at the end of the experiment. For instance the first plant had a workforce of about 1700 employees at the beginning of the study; however the workforce reduced to about 900 employees as a result of outsourcing activities like logistics and supply chain, a number of electronic elements, transfer of some employees to other various locations together with employee benefits. The second plant had about 1600 employees at the start of the study and there was a slight change by the end of the study. The two plants were producing the same kind of products, utilized the same technologies and had comparable work forces. These who took part in the outsourcing activities and the ones who did not take part were similar in various areas. The two plants were in financial distress as a result of high operation costs. Those who took part in the outsourcing program comprised of the employees who remained in the firm and worked together with the employees that were transferred from other sections within the company owing to the outsourcing decisions.
Two surveys were carried out, and according to the first survey carried out at the research site just before the implementation of the outsourcing program for the purpose of assessing the attitude of the employees, about 550 employees returned the questionnaires from the first plant generating a 35% involvement rate and 530 employees from the second plant generating a 37% involvement rate. According to the second survey which was used to assess the perception of the employees, 360 employees from the first plant and 620 employees from the second plant returned the questionnaires generating a 45% involvement rate for the two plants. A demographic statement of the respondent was weighed against the overall population at the two plants. The results showed that the demographic characteristics of the samples and the total population were comparable in all facets.
The attitudinal outcomes of the study found that outsourcing was a key change from the usual way of the company’s operation. According to statistical analysis involvement in the outsourcing activities in this case was negatively associated to perceived changes in contentment with opportunities, for commitment at work, for accomplishment of something at work and enhancement of opportunities and skills for advancement in the company. In addition, involvement in the outsourcing program was negatively associated to the perceived changes in communication throughout the company, on top of job meaningfulness, challenge and individual obligation for work.
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